What are some of the differences between commercial and residential property investment?
Commercial and residential property investment options bear striking resemblance, but there are also some key differences which potential investors need to be on the look out for.
Lease period- the lease period for commercial property is usually longer than that of residential property, with the latter taking just about 6 months while the former typically goes for a number of years. This creates a certain sense of security, but it can prove tricky when a tenant vacates on short notice.
Goods and service tax- this form of tax typically applies to commercial property, so a given percentage ought to be included in the buying price. This tax is absent in residential property investment.
Cost of maintenance- unlike residential property, the cost of maintenance and renovation of commercial property investment is usually incurred by the tenant, also known as the lessee. For the investor, this means wider profit margins, but it is important to indicate on the lease which party bears the costs of such expenses.
Limited functionality- unlike residential property investment which has a limited function, commercial property is designed for a wide variety of uses. It is for this reason that it is recommended that you go for property that is multi-purpose.