Residential vs Commercial Investment
Commercial Investment Market
The commercial investment market is dominated by professional investors. They operate through large investment companies, pension funds or through some syndicate investor groups. Their investment contributions can be very large and their target properties are usually large retail, commercial or industrial developments. They may have only a single tenant or a few key tenants who will have a long-term lease with them. The tenants are normally responsible for all repairs, insurance and taxes. Some of these larger developments may include attractive tax benefits to the investor. The investment is usually much longer. Investing directly in commercial property is usually limited to wealthy private investors.
Residential Investment Market
The residential investment market is open to smaller investors. They may invest in an investment property either directly, with a group or through a co-ownership scheme. They may be in a position to raise the deposit through equity in another property or their home. The availability of interest only loans has made it attractive to investors and combined with potential tax effective methods can produce an almost self-financing investment. The use of interest only loans must be monitored with caution as they are only attractive in a market with strong capital appreciation growth.
Residential Investment Pitfalls
- Unless your lifestyle allows you, the managing, letting and maintenance of your property can occupy considerable time
- The movement of tenants can be frequent depending on the location you choose
- Unless monitored correctly you may experience periods of no rental income due to voids.
