The investment done in residential and commercial properties has a huge difference. It is important to focus on the investment without making any mistake. The leasing business in both the investment has different dynamics. The expenses for housing property are less, as the requirement of the tenant will be basic and functional. On the other hand, the investment of commercial fitouts includes offices, malls, etc. that includes high vacancy and leasing risks. The commercial property has a great impact on the economy. The real estate market is also affected by the commercial property investment. They are costlier than residential and require long periods of lease. The rental value is also high unlike residential investment.
There is a huge difference in the maintenance, as the commercial property tenant will have to do all the repairs and maintenance on their own responsibility.
On the contrary, the landlord will be responsible to maintain the residence.
Know the lease period
- The lease period for commercial property is longer as compared to residential investment. This in turn, is translated into a guaranteed long-term flow of cash. The landlords have the right to lease the property for a certain period of time say five years.
- The tenant will always have the authority to extend the lease for more years. The document of leases is lengthy and has many clauses. The tenant should carefully go through the lease and then understand the terms by taking the help of a lawyer.
- Unlike the residential investment, the leases are very important. It is required to determine the price, value and above all the rent of a commercial fitouts. The tenants who have applied for a long-term lease can improve the value of the property.
- The lease is usually reviewed at the end of each period. It can be either renewed or terminated. The advantage with commercial leases is that the clauses and conditions can be easily added. It can be done as per your convenience wherever necessary. This should of course benefit both the tenant and the owner.
- The commercial tenants usually run business. So, if there is any drop in the economy, then there might be problem like loss of income. The business also can incur huge losses.
- In this situation, the tenants have to leave and the landlords find for another tenant. The banks usually are ready to loan more for housing market instead of commercial fitouts. Hence, the investors in commercial properties should have an apt knowledge and experience. It is seen that both residential and commercial investments have their own strengths and weaknesses.
What is the difference?
- The key differences between use of residential property and commercial fitouts are vast. The residences are meant for the people to live. The residential investors may have to constantly deal with the issues of the tenant like damage, neglect, or wear and tear.
- Since the commercial fit outs is only for business use the tenants have a financial motive. This is why they only take care of the property. The tenants are more attracted towards residential investments. Hence, the vacancy rates will also be very low.
- The banks are ready to lease the residential property and finance it up to a value of 10%. There is much more compliance in matters of property investment. The commercial investment might be time-consuming also costly affair.
- The compliance requirements are constantly increasing and the details of the documents are all secured. This has overwhelmed the investors and the ongoing relationship is improving.
- The only thing needed is to be well organized in the paperwork and administration. The relation with a good property manager will ensure that the investment is in good health.
