When thinking of real estate investment, people automatically think of residential properties – often giving little or no thought to commercial real estate as a viable investment solution.
Is one a better investment than the other?
Both asset classes are great investment options, but it all depends on what the investor is trying to achieve. This is because the two are completely different types of investments with different characteristics, and will help investors achieve different objectives.
Still, for sure one can maximise your chances for success. If you are dipping your toes into real estate for the first time and are considering an investment, read on.
Why Commercial Real Estate?
Investing in commercial real estate through commercial property funds or another, involves three sectors: retail, office and residential. Experts like Sentinel Property Group agree that the one thing they all have in common is that they are designed to produce a strong income stream, as tenants of offices and shops pay more rent than residential tenants.
In addition, management is less hands-on in commercial real estate compared to residential, as renewals are less frequent. Tenants are also usually responsible for repairs and maintenance.
While historically, commercial property is far less predictable than the residential property market, it is still a good investment.
Why Residential Real Estate?
Residential property does not produce as much income because the tenants do not pay as much as commercial tenants do. Landlords are also required by law to cover the building insurance, maintenance cost and repairs, which further dilute cash flow.
On the other hand, investing in residential properties is not as stressful. Instead of managing multiple tenants, landlords can only deal with just one.
Residential or commercial? There is no right answer to the question, but certainly, there is a best answer for you. Simply consider your objectives and your resources. With a bit of luck, the answer should jump off the page.