Commercial Vs Residential Property

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  whooah1979 on 10/03/2019 - 09:22

  +2

  Our clients seems to prefer to invest in commercial properties rather than residential ones. Dealing with pita tenants that won't let contractors do their work may give anyone a headache. They also have a knack for whinging and damaging the property on their way out.

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  [Deactivated] on 10/03/2019 - 09:26

  +1

  Commercial tenants generally pay all the outgoings as part of their contract.

  If you are using finance it is a lot trickier with commercial property. Speak to a broker.

  torn between the two options.

  What research gave you done so far? There is a big difference between the two. That's why not many mum and dad investors in commercial property.

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  chumlee on 10/03/2019 - 09:48

  +3

  Depends on location, age of property etc.

  Both have pros & cons. If it's one of these new office upstairs, warehouse downstairs new builds, I would pass. There's too many of them now.

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  bohn on 10/03/2019 - 12:19

  +1

  A 'good' commercial property will be a far better investment than a residential property, because as others have said, the tenants in com. usually pay all outgoings (council rates,water rates,some repairs). Often the tenants will stay a long time, as they are usually given 5 year leases with options of another 5,5.

  One of the potential downsides of a 'bad' commercial ppty is if you choose poorly or things change in that area it can be vacant for YEARS. Also it is often cheaper to get into residential property (unless you want to buy a whole block of residential units).

  Also the law is better for landlords in commercial properties - you can padlock the doors after a period of non-payment of rent… try doing that in a residential situation ;)

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  arkie0 on 10/03/2019 - 14:40

  If you're just starting and interested in property market go with residential, in my opinion less risk and difficulty overall.

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  [Deactivated] on 10/03/2019 - 14:44

  If I had money to invest I would be looking at a commerical property fund, your money is spread over a number of diverse properties which reduces your risk.

  In Perth I see a lot of commerical properties empty for a long time (I spend a lot of time in the industrial areas of Perth).

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  dcep on 10/03/2019 - 19:49

  don't know about capital gain for commercial property but i see plenty of vacant offices even in CBD / inner-city

  and retails closing down every often

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  RoseK on 11/03/2019 - 02:47

  Based on the factors above, lets look at why residential and commercial properties are not the same.

  1. Residential

  • Residential tenants are available regardless of the economic condition. This is because most people want to live and rent in places close to their friends, families, job location, educational institutions, etc.

  • Investing in rental homes also guarantees available cash flow and easier to rent. Even if a tenant leaves, there are always new tenants coming in.

  • Furthermore, it is easy to sell houses than commercial lots because demand from buyers is always there.

  • House rentals are determined by comparable market rates of similar houses in the area. Tenants pay their rents on a weekly or monthly basis depending on different countries.

  • The value of a residential property is calculated by comparing the market price of similar properties in that location. An appraiser is responsible for estimating the value of a house.

  2. Commercial

  • Commercial properties tend to be more lucrative than residential because of steady returns and better cash flow.

  • Tenants in commercial properties usually pay expenses such as repairs and maintenance. This is because tenants want to run their businesses as good as possible.

  • The lease period are longer than residential, which translates into guaranteed long-term cash flow. Landlords can lease to a tenant for a specific length of time (e.g. 5 years) and then have the option exercised by the tenant to renew the lease for another period of 5 years.

  • The lease document itself is quite long and contains many clauses. You need to study the lease carefully and understand the terms with the help of a competent lawyer.

  • Unlike residential, leases are very important as these documents determine the price, value, and most importantly the rents of a commercial property. Tenants who have long-term leases can significantly improve the value of the property.