Should you invest in residential property or commercial property? This is a question that every investor will be facing and busily weigh the pros and cons of. If you want to grow money in a market that is non-declining, steady, and which will deliver assured returns, then there is no better way to do it than through real estate investments. This is true both in urban areas and rural areas. If you want your money to grow every quarter, then real estate is where you need to invest. If you want to create something that you can pass on to your future generations, then also real estate is where you need to invest.
So the only thing remaining to consider is whether to invest in a residential property or commercial property.
Decoding Commercial Real Estate
This is where you would own a space in a commercial tower or complex, which you can rent out to businesses as a corporate or retail space. For commercial buildings, you are likely to have longer lease periods than for residential buildings. Some of these leases can even go up to 10 years, which means you don’t have to worry or look out for another tenant at any time before the contract period is over. This is great if you are looking for long-term stability without the hassle of changing or looking for new tenants on a frequent basis. The costs of maintenance are also taken care of by the tenant. The rental income is also higher for commercial properties, with owners getting more than 10% return on investment on commercial properties than on residential.
The flip side of this is that it can take more time and effort to find the right tenant and there are more challenges involved. Also, investors need to have access to more capital, either upfront or to be eligible for loans, if they want to invest in commercial properties.
Residential Real Estate
For residential real estate too, the advantages are many, such as the initial capital required to buy a property being lower than commercial properties and you get immunity against inflation. You can build a portfolio that is more diversified than with commercial properties, and you get a more stable income with your tenants being easier to find than for commercial properties.
The flip side of this is that maintenance costs have to be borne by the owner and you may get lower rentals when compared to commercial properties.
To decide, which is the best investment for you, you would have to consider many factors, such as how much capital you can afford to invest, whether you are looking for higher returns even if the risk is higher, whether you will be able to get tenants easily for either one of the properties, and what is more important for you-stability or return on investment. Knowing this will help you make the right decision that will be a sound investment in the long term!
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