Commercial Or Residential Investment Guide
For investors looking to expand into real estate, deciding between commercial and residential properties can be a difficult decision. Both property types offer several benefits, but depending on your risk tolerance and your investment goals, one may be better suited for you. From the large potential gains you can make on a residential property to the longer leases on commercial property, there are advantages and disadvantages for both.
If you’re unsure about making commercial or residential investments, we’ll be exploring the benefits and drawbacks of each.
Real estate investment has long been considered a cornerstone of wealth-building strategies. Within the realm of real estate, investors often find themselves at a crossroads when deciding between residential and commercial properties. Each option presents unique opportunities and challenges, catering to distinct investment goals and risk appetites. In this exploration, we’ll delve into the benefits of investing in residential and commercial properties, helping prospective investors make informed decisions based on their financial objectives.
Choosing Between A Commercial Or Residential Investment
For investors who are looking to enter into real estate but aren’t sure which avenue they’d like to take, here is everything you need to know about commercial or residential investment.
Residential Property
A sector which almost everyone is involved to some degree throughout their lives, residential real estate is an investment that typically yields consistent rental income. Depending on the type of property, whether it’s family homes, apartments, studios, or even student accommodation, you can find greater stability or greater return on investment. For most residential real estate investors, reliable long-term returns are the objective.
Unlike commercial real estate which can have higher barriers to entering the market, residential property is widely available in all locations, meaning buyers can find suitably priced properties by looking further afield if cost is an issue. Lower upfront costs and a broad range of financing options make it feasible for individuals with less capital to invest can start building a real estate portfolio. This accessibility is especially appealing to those seeking to diversify their investment portfolio beyond traditional options like stocks and bonds.
Additionally, residential properties stand to significantly appreciate over time. In the last 10 years alone, house prices in Australia have risen by 83% on average, and over the last 30 years in Sydney, property values have increased by a staggering 449%. Whether this rate of growth is sustainable is yet to be seen, but residential property tends to offer stable returns as well as the prospect of substantial growth, which can be an influencing factor when deciding between commercial or residential investment.
Commercial Property
Although residential real estate is the choice of many investors, expanding to commercial properties can potentially offer even higher rewards. From office buildings and retail spaces to industrial complexes, commercial real estate includes a range of investment opportunities.
In areas with high foot traffic and strategic positioning, commercial properties can command higher rental rates than residential properties as businesses are willing to pay a premium. Commercial leases also typically involve longer terms, often up to a decade or even longer, commercial property investors are afforded even greater stability, reducing turnover and its associated costs.
For commercial property owners, another benefit of commercial properties is no liability to pay rates of outgoings. Residential landlords bear the responsibility of paying for rates such as body corporate or strata, as well as council and water costs, whereas commercial landlords do not have this responsibility.
Investment Considerations
When considering a commercial or residential investment, several factors can sway your decision depending on your investment style and goals. Depending on risk tolerance, the risk versus reward of commercial property is not suitable for everyone. Investors with a lower risk tolerance may find residential real estate more appealing, whereas those who are comfortable with higher levels of risk can often find greater returns in commercial real estate. Additionally, the state of the economy and property markets may also have a significant impact. Although residential property prices experienced a temporary fall during COVID-19, a reversal occurred relatively quickly, whereas property commercial took longer to see a rebound.
If you are looking to decide between a commercial or residential investment, get in touch with the team at Rose & Jones. We have a wealth of experience in both residential and commercial property and can help you find the right investment property for you.
About Rose & Jones
Rose & Jones has been helping clients find and purchase properties in Sydney, Brisbane, and the Northern Rivers since 1998. A renowned property buyers agency across residential, commercial and industrial sectors, every one of our property experts meets our high standards, so you won’t have to compromise yours. With access to a wide network of off-market properties, our team can help you find the perfect property. Also offering property management services and investment advice, make Rose & Jones your go-to when it comes to real estate in New South Wales and Queensland.
