If you are looking for investment options that yield the best return in the future, then consider real estate, which is a safe bet that is available in the market today. A lot of people consider buying properties early in their life to benefit from it in the coming years as property prices appreciate over time. In India, an average salaried person also dreams of buying his/her property. However, there is always confusion regarding what type of investment would be the best.
What Is a Residential Property?
Residential properties are houses or apartments primarily used for residential purposes. A lot of investors buy residential property to give on rent to earn rental income from the property. Residential property could be rented out to working professionals, students who are living alone or on a sharing basis, or families.
Kinds of Residential Properties
- Stand-alone houses: This type of house is a free-standing residential property. It could be single-storied or could have multiple floors.
- Apartments – An apartment may have one floor or could be a skyscraper with multiple families staying in it. The apartment in a residential building complex will have many families living together who share the same amenities within the premises of the building. It is the most preferred type of residential property in the urban landscape.
- Duplex houses: This housing type has one house with two separate units, often with two separate entrances, but a single structure from the outside.
Why Choose Residential Property-
1) The purchase price is lower than that of commercial properties. In comparison to commercial real estate property, the cost of residential property is much lower and affordable for an average-income household.
2) Stable demand for rental residential properties- It is evident from the market research that demand for residential properties has been on the rise. More and more people are moving to urban cities for jobs and studies, therefore creating high demand for rented and owned houses.
3) Funds arrangement – It may be easier for individual investors who are investing in single-family homes or small multi-family properties to arrange funds as it requires less capital.
4)More likely to find tenants- It is relatively easier to find tenants for a residential property. Moreover, if it is appealing to tenants, it often leads to longer occupancy periods, making it a good bet for the owner of the property.
5) Tax advantages- There are some tax advantages given to the investor of residential properties that could really save some money.
What Is a Commercial Property?
Commercial property is a property typically used for carrying out a business. It could be an office set-up, a retail place, a warehouse, a restaurant or a hotel. The owners of a commercial property might carry out a business out of that space but could also lease/rent it out to other businesses. In the business scenario, investors typically rent a space rather than buy one till the time they establish themselves in the market and focus on savings for investing in their own business.
Kinds of Commercial Properties
- Office properties: These types of properties include small-scale office buildings, single-tenant buildings, etc.
- Retail buildings: Small shopping centres, grocery stores, restaurants, etc., come under retail buildings
- High-rise building: Commercial properties that are huge and well-maintained are leased out to big businesses
- Land: This includes undeveloped or underdeveloped land that has a definite scope of being commercialised in future.
- Others: All other commercial buildings, including hospitality, warehouse, etc
Why Choose Commercial Property-
- Higher rental income- In comparison to residential properties, commercial property yields higher returns and has great potential for higher returns
- Extended lease terms- There are longer lease periods, and the terms and conditions are more formal for commercial tenants, leading to a steady rental return for a longer period of time.
- Less or no maintenance burden- The landlord generally has no or fewer maintenance and repair responsibilities for commercial property as it is often pushed to the tenant to bear some of the costs.
- Diversify portfolio- It is a great chance to enter into larger-scale investments and portfolio diversification.
- Appreciation of property- There is a high potential for property appreciation in some established commercial sectors, particularly in prime places and upcoming locations.
Ultimately, the decision depends on the individual’s investment goals, appetite for risk, time period and the market conditions. While few investors would like to play safe and prefer the stability and simplicity of residential properties, others would like to benefit from the projected higher returns of commercial properties. In all cases, well-conducted research on the pros and cons of each property should be conducted to benefit from it.