People often get confused between a commercial and residential property when it comes to investing. This is because each has its own strengths and weaknesses. One also needs to consider the different factors and risks involved in both before investing in any one of them. Having money to buy any one of the property or even both is fine, but you need to understand the various differences between the two.
- Location –Commercial property shines if it is located in a popular area. If the location is right, then commercial property is going to bring higher returns when leased on rental basis. Location doesn’t matter that much for a residential property.
- Return on Investment –Now when it comes to ROI, then commercial property wins by a huge margin over residential property. When you lease out your commercial property on rental basis, then you can earn profit in the region of around 10 to 15%. On the other hand, residential property can bring ROI in the region of 4 to 5% maximum.
- Risks – For risks involved, residential property is the clear winner compared to commercial property. For instance; imagine commercial property doing business related to clothes. In this case, the commercial property may face competition from another property and has to stick with the clothing business.
- Initial Cost of Investment – For initial cost of investment, residential property wins when compared to commercial property. For example; banks offer 80% of loans for residential property. On the other hand, banks offer only about 60% of loan for a commercial property. Additionally, there are no tax benefits for commercial properties.
While investing in any one of them you must hire property lawyers in Sydney and other parts of Australia for your benefits.