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Commercial vs Residential Property Investments


Investment Properties Brisbane

We all know that investing in property can be a great way to generate passive income and create wealth but a question that frequently arises is whether to invest in commercial property as opposed to residential property. Both forms of real estate have their own unique attributes that may appeal to the prospective property investor but knowing the differences between the two will enable you to make better educated decisions as to where you should invest your money.

Commercial and Residential Property – What’s the Difference?

This is pretty straightforward, residential property is defined as land that is predominantly used for housing, including such structures as family homes, apartments, condominiums and the like. Commercial property is primarily utilised for conducting business that cannot be defined as an industrial operation. In other words, land or buildings that are utilised to generate a profit.

Advantages of Commercial Property over Residential

Commercial property leases tend to be a lot longer than residential property leases, anywhere from three to twenty years as opposed to your typical residential lease, which is often 6 to 12 months in duration. Furthermore, commercial property leases are often backed by guarantees from banks which makes them a much more stable investment.

It’s not uncommon for a business to take better care of the property than a residential tenant, as appearance tends to have a correlation to the professionalism and profitability of the operation.

This is not to suggest that residential tennants are slobs by default, more that commercial tenants have a greater financial motivation to looking after their dwellings.

Residential Property Investment Benefits

It usually costs less to purchase a residential property investment and hence a smaller deposit will be required. Rates on residential properties are usually much lower than for commercial endeavours.

Additionally, the profit potential of residential investments tends to be more predictable than for commercial property. Historically, residential property investments generally double in value every decade or so. Another advantage of residential investment properties is that is often times a lot easier to find tenants to fill the vacancy, not so much for commercial investment property.

Regardless of whether you make the decision to invest in commercial property or residential property it always makes sense to speak to a property investment expert before committing your funds to a substantial investment.

Contact S.E QLD Investment Property for an obligation free property investment consultation or download our free E-Book “Street Smart Essentials – Property Investing For Financial Security”.

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