Want To Invest In Property? Here’s Why You Should Consider Commercial Real Estate Over Residential

    Date:

    Share post:

    Looking for investment avenues (other than self use)? Think beyond residential property.

    Although residential property is more popular and is the first thing that comes to mind when one starts thinking about investing in real estate, benefits of commercial property are way more significant. Such class of property includes offices, retail buildings, warehouses, industrial buildings and similar mixed use structures.

    Better Rental Yields

    While a rental return of seven to eight percent is what one can expect from a commercial property, residential property usually yield rental returns of two to four percent. Talking about yield over a decade, the overall returns estimate over 10 years are now around eight to nine per cent per annum in the residential realty sector while it is 13-15 per cent per annum in the commercial realty sector.

    Vacancy Risks

    Most of the residential properties are leased on annual basis while commercial properties are leased for longer tenure. Therefore, vacancy risk in residential properties will always be higher owing to frequent turnovers of tenants.

    Liquidity

    While both are illiquid assets, it is easier to create a portfolio of commercial properties with Real Estate Investment Trust (REIT) regulations than residential properties. Since demand of pre-leased Grade A offices are higher than residential properties, it is always comparatively easier to liquidate and exit a commercial property.

    Flexibility

    Commercial real estate can be very flexible especially when it comes it various finance options. Banks and other lending institutions offer a series of payment options to investors looking to invest in commercial assets.

    Tips for Investing in Commercial Real Estate

    • Always target a commercial property that is already leased. An unleased property will be more of a burden as it will not provide any return and may even cause cash drain in the form of maintenance and taxes.
    • The location of the property should be in a well-established micro-market where there is a good demand for the office spaces. The site should be well-connected with proper infrastructure in place.
    • If you can buy space over 10k sq ft, CBDs and SBDs offer good options

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here

    Related Posts

    Latest posts

    Co-working Leaders Welcome Union Budget 2024

    Commercial and co-working segment of real estate sector have appreciated the government's focus on job creation, skilling...

    Developers Cheer Sitharaman’s Union Budget 2024

    Real estate sector has wholeheartedly welcomed Union Budget 2024, primarily owing to Finance Minister Nirmala Sitharaman's generous allocation...

    Union Budget 2024: Highlights For Real Estate Sector

    Covering a wide spectrum of Indian sectors, the first Union Budget of Modi 3.0, released today (23), focuses...

    DLF Enters Goa Market With Luxury Villas

    DLF Limited, a leading real estate developer based in Delhi-NCR, is set to launch super-luxury villas in Goa...