Residential vs Commercial property
Ready to purchase your next investment property?
Are you aware of the differences between residential and commercial properties?
Most investors are familiar with the advantages & disadvantages of purchasing a residential investment property, however they have never thought about commercial real estate.
Commercial properties are categorised into three main sub asset classes: retail, office & industrial. They each have their own cycles, risks & benefits.
Historically commercial properties have offered yields from 4-10% after costs depending on the sub asset class.
Potential benefits of Commercial real estate
- Higher returns: The average rental return for residential properties across Australia’s capital cities is 3.6% according to CoreLogic RP Data. In contrast, it’s not uncommon to get anywhere between 8% and 12% gross rental yield for commercial properties.
- Longer lease terms which can range from 3 years, 5 years to 10 years with Fixed rental or annual increases with inflatio
- Cost of all outgoings: council rates, water rates & body corporate rates are generally paid by the tenant rather than the landlord
Risks
- Stricter lending conditions. Buyers may require a 25% to 50% deposit
- Potential longer vacancy periods
- With changes in infrastructure in the area, values of properties can rise sharply and drop sharply as well.
Some commercial properties may have a mixed-use zoning which means that site can be used for both residential and commercial purposes.
If you would like to learn more about the benefits & risks of Commercial vs Residential real estate, please click on the button below.
Disclaimer:
This advertisement provides general information only and has been prepared without taking into account your objectives, financial situation or needs and It does not constitute legal, tax or financial advice.
