Be it any type of property, the idea of buying rental property at this point is quite terrifying. But if you understand the differences between the Residential and Commercial Property, you can make an informed decision.
It may appear to you as if you know everything about Commercial and residential properties, but there is so much about them you still need to learn.
If you are willing to buy a rental property whether it is commercial or residential, you should diligently learn the facts, you will end up losing it, otherwise.
You may ask Property Management Companies in Bangalore to help you in buying rental property.
For those who are new to investing, let’s give you a little gist about Commercial Property and Residential Property.
Commercial Properties are those properties used for business purposes.
List of properties that refer to commercial properties are,
- Retail Buildings
- Office buildings
- Industrial properties
- Mixed-use properties (properties with combined use – retail, office, and apartment)
If you want to know about buying rental property in the Commercial Sector, you need to understand its pros and cons to make a clear decision.
Residential Properties are properties that are meant for living. If you are planning to buy a rental property in the residential sector, you may want to go through it until the end of this article.
Let’s see the factors that make a change in buying rental property in the Commercial and Residential sectors.
Following are the list of factors contributing to the differences,
- Type of customer
- Opportunities for Investment
- Customer Rent Contract
- Location plays a major role
These are the main differences when it comes to determining the buying of rental properties in any of the mentioned sectors.
Types of Customer:
The notable difference between a residential and commercial property customer is that you will call your residential customers as tenants and they will be paying you a monthly rent to continue staying at your property.
For commercial property, the prospects will be called as business owners and companies and will either pay you rent once a month or take up for lease.
Opportunities for Investment:
When you compare residential properties with commercial properties, commercial properties have a higher degree of investment opportunities than residential properties.
Residential Properties come with higher maintenance than the commercial properties given, the fact that residential properties have tenants all day every day making it a huge possibility for repeated maintenance issues.
For commercial properties, since the business time is limited and moreover, the businesses itself will take care of all the issues that arise in a commercial property.
If you are willing to buy a rental property, contact a Property Management Company in Bangalore to get enough guidance in property investments.
Customer Rent Contract:
A rent contract is made irrespective of it is commercial or residential property. For commercial property, the rent contract or a lease contract is made for a lengthy duration.
For residential property, the rent or lease contract is made for a short span of time.
Location plays a major role:
Location determines how a Commercial property or a residential property makes its businesses move.
There are certain locations that are predominantly best for commercial properties where if you make any commercial investments, there are high chances you get an increase in ROI.
For residential properties, it’s the same.
Find the best place in your city/town to buy rental properties that bring an enhanced Income.
While these are the notorious differences involved in Commercial Properties and Residential properties, you can determine to buy a rental property (Residential/ Commercial) based on its nature and its advantages.
Advantages of Commercial Properties:
Commercial Properties come with distinct advantages in the real estate industry.
- High Income Potential
Commercial Property Investment has a higher Income Potential than any other type of real estate investment.
- Improved Professional Relationships
You can maintain a network of professional relationships by being involved in Commercial property Investment groups. You can buy a rental property in the commercial sector with Property Management Experts backing you up.
- Public Eye
The commercial tenants and property owner’s interests must correlate with each other which helps the owner maintain and improve the quality of the property, while it improves the value of the commercial property on the other hand.
- Very less operational hour
There is absolutely no need to waste your whole day on operational tasks. When you are buying a rental property for commercial purposes and letting it for rent, the businesses themselves will take care of the operational issues.
If at all, there is any, you can outsource a company or a person to take control over operational issues.
- Price Variations
From the commercial property bills of the present customer and income statement, you can easily estimate the expenditure of that commercial property and figure it’s value in that location.
Unlike residential properties, they do not involve emotional pricing.
- Flexibility in Lease Terms
There is a triple net lease term in commercial property investment.
The general concept is that you as the owner of the property have nothing to with paying any expenses on the property whereas tenants in residential properties would pay.
Advantages of Residential Property Investment:
Before you invest in buying rental property in a residential area, make sure to learn the advantages of buying a residential property.
The unique advantages of Residential Property Investment are,
- Positive Income
You will have income coming in every month when you buy a rental property for residential purposes. All you have to do is maintain the property and have a good relationship with the tenant.
- Facilities to get a loan
If you are applying for a home loan, chances are you get the highest possibility of getting the loan sanctioned.
- Leasing is easier
Leasing options are pretty convenient in a residential property in comparison to a commercial property. And the lease period is relatively less.
- Tax Deductions and Safety:
Even if the rental income is taxable, it comes with viable deductions in the taxes. Taxable Rental Income can be effectively reduced by expenses that include Insurance, Mortgage Interest, Repairs, etc.,
Also, A residential property is always safe since it’s a place to dwell and totally family-oriented.
Now that you have an understanding of the advantages of Commercial and residential property, you can make informed decisions in buying rental properties.
“However, the best option for buying rental property is still not known and can’t be determined. It is completely based on your requirements and expectations and the goals of buying rental property. You can either buy a commercial property or residential property of your interest but if you are sure about investing in real estate, make sure to go through the perks you can avail if you are buying rental properties of both kinds. If you need any further assistance, you can contact OwnersTown Property Management Company”.