Knowledge Centre
Why are people investing in commercial properties over residential properties?
Due to various reasons, real estate has always been a popular investment option for several people. It provides a sustained flow of income for a long period. There are two main types of properties available for us to invest: residential and commercial. Both are profitable, still the trend is investing in commercial properties over residential properties because of its lucrative returns.
The commercial properties fetch higher rental income compared to residential properties. For example, a small businessman may be willing to pay Rs. 30,000/- per month for a small shop, whereas a residential tenant can afford to pay only Rs. 15,000/- per month for an apartment. It clearly indicates that commercial properties can certainly generate more cash flow for investors, making them an irresistible investment option for everyone.
The longer lease term is another important reason that makes people to invest in commercial properties over residential properties. In general, residential lease typically last one year, commercial lease can extend up to seven to ten years. This provides investors with a stable source of income for a longer period of time, which can help to offset any potential vacancies or fluctuations in the rental market.
Besides, commercial properties always require less maintenance than residential properties. Usually, a commercial property owner will take care of maintaining the building’s exterior and common areas, the individual tenants will handle their own interior spaces. This can reduce the amount of time and money that investors need to spend on upkeep and repairs, making commercial properties a more passive investment option.
Overall, commercial properties can provide greater potential for appreciation in value than residential properties. This is because commercial properties are often located in areas with high demand and limited supply, which can drive their value over time. Additionally, commercial properties can greatly benefit from improvements and renovations that can increase their value and rental income.
Investing commercial properties also has some drawbacks. The commercial properties may be more difficult to finance than residential properties; and they frequently require a larger initial investment. In addition, commercial properties may be more sensitive to economic recessions and market fluctuations, which can affect their flow of income and value.
If we carefully analyze the pros and cons, both residential and commercial properties can be profitable investments for us. However, the commercial properties offer a wide range of benefits like long lease term, lowest maintenance cost and greater potential for value appreciation. This could be the reason for people to choose investing in commercial properties.
