Blog

January 08, 2020

COMMERCIAL VS RESIDENTIAL INVESTMENT

If you’re ready to invest in property in 2020, you have two options – residential or commercial. And while both options provide an abundance of benefits, there’s a few things you need to consider when deciding which property type is best for you.

Lease Terms

Typically, a residential lease runs for a year. Commercial leases generally start at a minimum of three years and can be as long as ten years (plus options). Which of these is better? A long lease means lower vacancy rates and turnover costs and ensures more predictability when it comes to cash flow.

The downside of longer leases is it may be difficult to get rid of a difficult tenant.

Economic Downturn Performance

When there’s an economic downturn, the first ones to suffer are usually retailers. Businesses do fail at higher rates, even when the economy is great. This can be a higher risk for property investors.

Tenant Pool

While retail hasn’t been performing well in recent years, there are plenty of other businesses looking to rent commercial properties. So, you might not want to invest in retail properties, however, office space and warehouses are still a smart commercial investment property option. It’s all about investing in the right type of property.

Real Estate Analysis

There is more analysis required when investing in commercial property. When it comes to residential analysis, money can be made through cash flow, equity building, and appreciation. Commercial property requires a view of rental history, maintenance records, profit and loss statements, and so on. Not all of this is available from a simple property listing.

There are many benefits to both residential and commercial investment. Do your research, find the market that suits your expectations the most, and talk to a financial advisor.