A successful property investment requires an understanding of the various complex market factors involved, specific financing requirements, leasing options, and property management solutions.
It is also important to have a good grasp of the differences between residential and commercial property investments, including their potential returns and risks. An understanding of the distinguishable qualities between the two will give you a more accurate basis during the selection process.
Should you experience challenges with your investments, it’s best to consult with property experts, such as Sentinelpg.com.au. Professional advice is always helpful when you find yourself in a dilemma or when you are faced with a problem you can’t solve on your own.
When Residential May Be a Better Choice
With a residential property investment, you can take out a loan amounting up to 80% of the property’s value. In most cases, making a down payment of 20% will allow you to bypass the costly mortgage insurance.
Once you have this investment, you can use its equity as security when making another property investment. Keep in mind, however, that even if you can make rental income out of it, the returns are lower than that from commercial properties.
Why Go for Commercial Properties
One of the biggest attractions to commercial real estate property is their potential for delivering greater returns on investment. Residential properties have an average rental return of about 3.6%, while their commercial counterparts can garner 8-12%.
Commercial property tenants usually stay for three up to 10 years, which means a longer, guaranteed source of income for you. Additionally, investing in commercial properties will require you to come up with a smaller capital outlay.
The Bottom Line
Though residential property investments may be less risky, you should still consider the 10-year trend of such investments bringing in lower returns. To have a much bigger guarantee that you will get better returns, you may want to stick to a commercial property investment instead.
So which type of property should you invest in? It will still depend on you, particularly your budget and the amount of risk you are willing to take.