Here is an Easy Guide on Whether to Invest in Residential or Commercial Property
May 27, 2017 Home Trading Steps
People always get confused whether to invest in residential property or the commercial property to get better returns. The leasing of both the residential and commercial properties is different. Lately, the rental on the residential properties has become a trend in India. This helps in fulfilling the affordable housing goal. Also, the tenants only require a decent house with proper infrastructure.
However, the commercial segment is riskier in terms of investment. They may not be occupied and have the risk of vacancy. The commercial segment of real estate is directly linked to the economy. Unlike the residential real estate market, the commercial market is much correlated to the country’s economy.
To explain the broad difference between the two
1. Commercial properties have a longer leasing period and higher rent than the residential properties.
2. Commercial properties are always more expensive than the residential properties unless the person investing is investing in shops.
3. In case of repairs and maintenance, the tenants are not responsible for the residential properties while in commercial it all comes down to the owner.
Which one to invest in?
Although the legal aspects surrounding the commercial properties are more complicated, the investor can fetch better a longer leasing period and higher rentals with them depending on the kind of deal you get. However, one should understand and be well versed with it before investing the commercial real estate market.
Residential market, on the other hand, is more flexible and easier to understand. The return on the apartment or individual properties is not that attractive but the return in institutional properties is far more attractive and higher in the residential segment.
According to the experts, the commercial properties can fetch anywhere from 6 – 10 percent rental yield, depending on the quality of construction, location etc.
It is a general fact that the return on the commercial properties are higher than the residential properties, the commercial properties are also subjected to risks.
Pros and cons of residential properties:
1. They have steady return and the cost of rent goes up as the value of the property increases.
2. The investors enjoy many tax benefits when invested in the residential segment.
3. It can be passed from one generation to another.
4. The investor is free to use the property as per desire. If they want to use it for renting for a long time, they are free to. If they want to move into the property, they can.
5. Possession delay is the major risk in case of residential property.
6. It also needs constant maintenance and checkups that totally fall on the investor.
Pros and cons of commercial property:
1. A good rental income is guaranteed.
2. Location of the property is very important. If the commercial property is in top 3 tier cities then it will fetch a good rent.
3. Lease period id longer
4. Rental value appreciates with time.
5. It is riskier both in terms of capital investment and vacancy for a longer period of time.
However, the commercial segment is riskier in terms of investment. They may not be occupied and have the risk of vacancy. The commercial segment of real estate is directly linked to the economy. Unlike the residential real estate market, the commercial market is much correlated to the country’s economy.
To explain the broad difference between the two
1. Commercial properties have a longer leasing period and higher rent than the residential properties.
2. Commercial properties are always more expensive than the residential properties unless the person investing is investing in shops.
3. In case of repairs and maintenance, the tenants are not responsible for the residential properties while in commercial it all comes down to the owner.
Which one to invest in?
Although the legal aspects surrounding the commercial properties are more complicated, the investor can fetch better a longer leasing period and higher rentals with them depending on the kind of deal you get. However, one should understand and be well versed with it before investing the commercial real estate market.
Residential market, on the other hand, is more flexible and easier to understand. The return on the apartment or individual properties is not that attractive but the return in institutional properties is far more attractive and higher in the residential segment.
According to the experts, the commercial properties can fetch anywhere from 6 – 10 percent rental yield, depending on the quality of construction, location etc.
It is a general fact that the return on the commercial properties are higher than the residential properties, the commercial properties are also subjected to risks.
Pros and cons of residential properties:
1. They have steady return and the cost of rent goes up as the value of the property increases.
2. The investors enjoy many tax benefits when invested in the residential segment.
3. It can be passed from one generation to another.
4. The investor is free to use the property as per desire. If they want to use it for renting for a long time, they are free to. If they want to move into the property, they can.
5. Possession delay is the major risk in case of residential property.
6. It also needs constant maintenance and checkups that totally fall on the investor.
Pros and cons of commercial property:
1. A good rental income is guaranteed.
2. Location of the property is very important. If the commercial property is in top 3 tier cities then it will fetch a good rent.
3. Lease period id longer
4. Rental value appreciates with time.
5. It is riskier both in terms of capital investment and vacancy for a longer period of time.
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