Should you invest in commercial or residential property? This age-old dilemma is one that I have been asked more times than I can count. And for a good reason. There are benefits to both types of property investment. But don’t just take my word for it. Let’s dig a little deeper into the two options and see which makes more sense for you.
What Is the Difference Between A Residential and Commercial Property?
While all properties are unique, there are some differences between commercial and residential property that are useful for anyone thinking about buying their first property or looking for alternate investment options.
Residential property is for people to live in, while commercial property is for running a business out of. The biggest difference between them being that residential property can only be lived in, whereas you can make money from a commercial property or rent it out.
Commercial Property Investment Pros and Cons
Commercial property investment has become increasingly popular, with new strategies being developed to help investors make money from it. This investment opportunity provides huge growth opportunities in a very short time. In fact, the ever-increasing demand for commercial spaces has helped commercial property prices to grow consistently over the years. This rent growth is much higher than the rates of interest that you will earn on your money in a bank or other financial institution.
If you have a sizeable amount of money at your disposal, then probably you should think about investing in commercial properties. However, the market can be very complex, and for most people, investing in commercial properties is inadvisable without the backing of a property company and seasoned investors.
Residential Property Investment Pros and Cons
The last few years have been a feast for those who were able to invest in commercial real estate. The more recent decline, however, has made many reconsider their options. The good news is that residential properties are still considered a secure investment option. In fact, it might be a better choice than commercial real estate, at least in the long term, thanks to the property investment trend that has seen a huge shift away from commercial properties and more towards residential investment.
There are numerous reasons for investing in residential property, but the main reason is cash flow. Because the rent on residential property is fully tax-deductible with depreciation, investors receive more overall profit.
So, which is Best – Commercial or Residential Property Investment?
Deciding what type of property investment to go for can be a difficult decision. There are also plenty of guides online that outline the difference and pros and cons between being a landlord for commercial and residential property.
There are certain areas that favour commercial, whereas others favour residential. The decision can be made more difficult when you are not sure what the market is doing or what agents in the area are reporting. Whereas one agent might tell you something, another at the opposite end of town might have a completely different story to tell.
Make sure when you are considering becoming a landlord, whether residential or commercial, that you weigh up the pros and cons of each and make the decision that’s right for you.