Buyer Tenant Agency

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Residential vs Commercial Property Investment

 ResidentialCommercial
Initial Capital10-20% deposit30-40% deposit
Rental Yields3-4% rental return5-12%
Lease LengthYear by Year5-20 years
Vacancy PeriodsShortLong
Lease TermsFixed Lease Term, fewer variationsEvery Lease are different with huge variations
Rent IncreasesNo fixed annual increasesFixed 3-4% annual increases
Maintenance and RepairsLandlord responsibleTenant responsible
Outgoings(Rates,Insurance,Tax)Landlord responsibleTenant responsible

Should I invest in residential or commercial property?

Frankly, if you are a new property investor, most likely residential will be the first option since the risk associated and knowledge required are much lower, also less initial capital is needed for residential investment.

On the other hand, if you are an experienced property investor that already owns multiple residential investments, investing in Commercial property would make sense as this is a good way to increase your cash flow because of the higher rental yields, also you can diversify the investment portfolio and reducing the effects from a downturn residential cycle.

To keep it simple:

Residential investment – Lower risk, lower return

Commercial investment – High return, more risk associates

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