When investing in real estate, it is important to know that both commercial and residential properties have their advantages and disadvantages. While commercial properties in Mohali tend to be more expensive than the residential ones, they also yield much higher returns for the investment. However, residential properties are bought for a more end-use reason apart from a long-term investment. The path to figuring out which kind of property would be more suitable as an investment for you, requires you to conduct thorough research. Here is a list of benefits of each to help you choose the right one for you:
Benefits of Commercial Real Estate
#1. Higher Returns
The primary advantage that commercial properties have over residential ones is that they bring higher returns. It goes in tune with the fact that higher risks bring higher rewards. When compared with the prices and returns on residential properties, commercial properties in Mohali offer much higher returns. In fact, commercial real estate investments can bring an average return of approximately 12.7%, in comparison to the mere 8.8% of residential properties in a period of 15 years. Moreover, having more space allows for more tenants which gives more money. As an investor, this can significantly help you diversify your portfolio.
#2. Better Tenants
Sometimes in the case of residential real estate owners, it can be quite difficult for them to find tenants who would keep the property well maintained and are qualified to be tenants. Fortunately, commercial tenants are usually businesses, large corporations, or startups. This means that they are much more likely to maintain the property and respect the rules you set for it. This can make a big difference on your life as a property owner.
#3. Triple Net Leases
Triple net leases may vary from case to case; however, they are still extremely valuable for all investors interested in commercial real estate. Because of this lease, you won’t have to pay any expenses on the property since the lessee handles all the expenses for it. Therefore, all you need to do is pay the mortgage of your property and stay stress free about your investment. Big corporations are more likely to sign such leases to maintain a look and aesthetic that matches their branding.
#4. Easier to Increase Value
A major difference between residential and commercial real estate is the fact that property values are more flexible in the commercial side. Residential properties are much more likely to have their values determined on the basis of comparable properties. For commercial properties, it depends on the cash flow it is earning. Therefore, this can allow you to see a faster appreciation in the value of your commercial property in Mohali.
Benefits of Residential Real Estate
#1. Low Initial Costs
While obtaining commercial real estate loans in the initial stages are possible to obtain, they still require a higher investment from your side. The cost of investing in residential real estate is much less in comparison and allows the average person to begin investing without having a fortune to back it up. It is also provides the much-needed experiences to investors who are just starting out in the field. Moreover, after investing in several residential real estate properties, you can always move on to commercial properties.
#2. Decreased Turnover
For residential real estate, tenant turnover is something you won’t often have to deal with. On the other hand, having a residential property gives you very volatile tenants – businesses which are likely to evolve and grow. Therefore, you would have to spend more time screening and finding tenants with a commercial real estate property than a residential one. If your focus is on acquiring long term renters, then residential investment is the right step for you.
#3. Better Zoning Laws
As a commercial property owner, you would have to deal with much more red tape due to stricter zoning laws and harder to acquire building permits. On the other hand, the zoning laws on residential properties make the rules much more lenient. This can give you a more stress-free environment to pursue your investment goals with.
#4. Larger Tenant Pool
This is one of the major advantages that residential properties have over commercial ones. A larger tenant pool is simply out of the need of people to live in a nice place. Having a commercial property strictly limits you to businesses as tenants which tend to be pickier in where they wish to establish their office.
Both commercial as well as residential properties have their own benefits and negative qualities. You should review these to find out which one will help you achieve your investment goals.