Property has long been a popular choice of investment. If you have decided that you would like to diversify or begin your investment portfolio by purchasing a property, there are a lot of decisions that need to be made. One of the key decisions is whether to invest in commercial or residential property.
It is important to be aware of the key differences between investing in residential and commercial property. Of course, you will already be aware that the former means that your tenants are going to be living in the property you have purchased, while the latter is an investment in business premises.
Investing in residential property
Investing in residential property can be a stable choice for many different reasons. Residential property has the potential to deliver an income for you from day one; tenants are always going to be available to provide a regular rental income. The beauty of buying a home is how in demand accommodation is, and there will always be someone interested in living in it.
You will also benefit from the increase in value of the property; with house prices rising consistently, you’re almost guaranteed to make money off your investment in future years. Capital gains is also an attractive feature of investing in residential property.
Commercial property investment
While commercial property investment can be lucrative, it comes with more risks. Not only do you have to consider the impact of the economy, but also you probably won’t get as much financial assistance in terms of bank loans. Most banks are willing to lend around 75% or more for the housing market, yet 60% or less for the commercial market. Plus, there are many clauses with regards to the contract, so you will need a good lawyer on your side to help you navigate your way through this. If you do decide to go down this route, you need to have enough cash reserves to handle the higher risks, as well as greater experience and knowledge.
In terms of tenants, it is fair to say that both commercial and residential properties can be exposed to bad tenants. While luck has a lot to do with it, there are now stringent procedures in place for screening tenants to make sure you do not fall foul of a bad lodger.
Hopefully, you are now aware of the key differences between commercial and residential property investment. If you are interested in investing in residential property, we can bring you the best properties on the market. Contact us today on 0845 643 1263 for more information.