Where to Invest, Residential or Commercial property?
When presented with a choice between residential or commercial property, it can be difficult to know which option to choose. What may be right in certain cases, may prove to be wrong in others. Therefore it is important that you understand the distinct advantages and challenges that both property types present.
To make things easier for you, we have drawn up a comparison of both the property types to see how each fared on certain important parameters.
Commercial properties are priced higher than residential properties. As such, the initial investment is also higher for commercial properties. Nonetheless, commercial properties are financially more rewarding. As in, you will be able to command a better rate for commercial properties.
Lease lengths for commercial properties are longer than they are for residential properties. this has both positive and negative connotations. A longer lease period ensures durable occupancy and constant cash, irrespective of prevalent market conditions. In volatile markets, long-term leases could be a blessing. But, on the downside, with commercial properties, you cannot take advantage of suddenly favourable market conditions. You will have to wait out the expiration of the tenancy period before a rent revision opportunity arises.
Whether commercial or residential property, ‘location’ plays a pivotal role. More so, in the case of commercial properties. For, commercial properties must have convenient access to facilitate the frequent and fast movement of raw materials, goods, and people.
In the case of residential properties, the responsibility for maintenance lies solely with the owner. Whereas in the case of commercial properties, it is the tenant who is responsible for the upkeep and maintenance of the property.
Finance for residential properties is straightforward and easy to obtain. The same isn’t the case for commercial properties, to obtain the finance for which the borrower must submit a detailed proposal and reassure lender with payback capabilities.
Returns, generally, are high for commercial properties. But it relies heavily on the location factor. Better the location, higher the purchase price of the property and higher will the returns be.
Demand for residential properties is higher than the demand for commercial properties.
Filling a vacancy
It is easy to market and rent a residential property. The same, however, cannot be said about commercial properties. But, commercial properties, once occupied, remains so for a longer period, thereby ensuring a steady income.
Investor Experience and Expertise
To invest in commercial properties, you must have a certain degree of expertise. For, it is difficult to ascertain the value and viability of commercial properties which aren’t located just off the road; whereas in comparison, it is easy to evaluate and ascertain the viability of residential properties.
Irrespective of whether the selected property is residential or commercial, what is of paramount importance is a good tenant. By a good tenant, we mean, someone who will treat the property well and honour the agreement in its entirety.
If you wish to know about ways to make money from real estate investing, read How to Make Money from Real Estate Investing.
For residential or commercial properties in Dubai, Contact Aurum Real Estate. We have a solid portfolio of world-class properties and a team of highly experienced professionals who will guide and counsel you at each step of your investment journey.
To know more about us, visit our website: www.aurum-re.com