Know why commercial property returns are high as compare to residential property
You might have heard a lot that – real estate property investment gives good returns. In this property valuers can help you to find the property valuations. But the question arises – in which property type we should invest to get maximum ROI. Before answering to this question, the property valuer will ask you what would you like to have – cash flow or capital growth. As commercial property grants cash flow and residential property is best for capital investment.
If you are seeking for the quick capital returns than surely the property investment in residential property is a great way to make money. Where buying, selling and property valuation process is little easier than commercial property. As it is easy to find the comparables of residential property rather than commercial property.
So investing in commercial property comes with high amount of risk. As money involved and returns both are high in comparison with residential property. Higher rental returns and low maintenance cost of commercial buildings grab more interest of investors.
For example – You purchased the residential property and commercial property in same amount say for – $10,00,000. The rental returns of both the property vary because commercial properties are good enough to give you rental returns with less maintenance cost (for owner). Where as residential property lacks in this feature.
It is hard to get 3-4% of residential property value received as rental amount annually. Whereas commercial property are potent enough to bestow 7-8% of rental amount annually of its total value.
Along with this residential owner has to pay for property maintenance & expenses like – insurance, property tax, water rates, management fees, maintenance fees and more. But in case of commercial property, it is something differ. All the maximum expenses fee is given by tenant so the double bonus received by the commercial property owner. The tenant bears major expenses like – management fees, maintenance fees, insurance amount thus the commercial property owner gets maximum rent with no expense.
If we will discuss about the most expensive city of the Australia – Sydney the report says that Sydney commercial buildings like offices will grant great profit to those who invest. They consider to get the best returns on investment in commercial property.
No doubt the best rental return comes from commercial building but the commercial property valuation process is tough and don’t underestimate the low rates of capital growth and longer vacancy period of commercial buildings as finding the tenants for the commercial building is tedious and toughest one task to do. It takes even a year to find a tenant for your commercial building.
To understand the commercial market investment you have to put large efforts as it is not everyone’s cup of tea. However the commercial property valuers can help you to find the best deal and their valuable suggestions can help you in making investment and getting returns out of your commercial buildings.
Hire the best property valuer to invest smartly in commercial property. Our experts are always happy to help you out. Feel free to contact us.