How they’re different how they can work for you
Whether you’re growing your portfolio or looking to set up your own venture, commercial property investment is very different to residential property investment. While both forms of property are available through finance from major lenders, the types of loans and mortgages available differ according to the terms and types of properties being invested in.
Difference between residential and commercial property investments:
Length of lease: Typically, commercial leases run for greater periods of time as opposed to residential leases (6-12 months on average) creating a more stable and certain income over the period of the investment.
GST: When you take out a mortgage to purchase a commercial property you will incur a Goods and Services Tax. You can claim it back later however it drives the initial price of the investment up.
Maintenance: As the landlord of a commercial property you are not required to pay for maintenance, repairs, and rates. This is the responsibility of your lessee.
Landlord duties: As the owner of a residential rental property you are responsible for ensuring your tenants are living in acceptable conditions – this means you pay for all maintenance, repairs, rates, and are responsible for the wellbeing of the property.
Location: Taking out a mortgage to invest in residential property is wise, especially if you do it in the right area. Housing values fluctuate more so than commercial premises, so having a quality home available for rent in a sought after area is the key to ensuring a good return on your investment as well as steady, ongoing income.
Mortgage amounts/repayments: Due to the nature of your residential loan, you will typically incur lower repayment rates as the initial loan you need to take out will be of lesser value when compared to the large sums needed for a commercial property investment. This means lower repayment amounts, offset by your rental income.
For expert advice and information of commercial and residential mortgages contact the experts at ACA Finance today.Read More