Why you might invest in commercial over residential property

Commercial,ResidentialTuesday 20 September 2016

Written by Stephen Lovison, Burgess Rawson Sydney

If you are considering adding to your investment property portfolio, it’s vital to purchase a property that will best help you achieve your financial goals.

One of the first decisions you need to make is whether to invest in commercial or residential property. Traditionally investors have been attracted to the relative safety and low entry costs of the residential market. However, many investors are now choosing to turn to commercial property investment as the benefits stack up.

So why should you consider investing in commercial property?

Strong yields

While the initial outlays of purchasing a commercial property are higher, the return you can expect to receive is also higher.

Attractive lease periods

Residential property experiences a high tenancy turnover, with short-term lease periods of six to twelve months. Commercial property leases generally have a minimum lease period of three years and depending on the type of property and tenant can start at 10 years. This provides investors with financial security as they receive regular rental income for a lengthy period of time.

Additionally, commercial leases generally have rental increases linked to the consumer price index or a set percentage each year already built into them. This allows you to avoid the drawn out process of negotiating rental increases.

Tenants responsible for outgoing payments

When it comes to commercial property, the often-expensive ongoing costs such as rates and repairs are generally the responsibility of the tenant, as opposed to residential properties where the cost is borne by the landlord.

Commercial tenants are also responsible for the costs of any changes they wish to make to the building or property, and to also return the property to its pre-lease condition when the time comes to vacate.

To learn more about the commercial property market and why the addition of a commercial property to your investment portfolio may be a sound investment for your future feel free to contact us.