Should you buy an residential or industrial property?

03 Mar Should you buy an residential or industrial property?

There are two types of buyers in the property market. There are those who purchase a property to live in it, and then there are those who see property as an investment. For those people, they want to get the best possible return on their investment. So the question some of them may ask is, should I buy a residential property or should I buy an industrial property? As with any property purchase, you’ll need to consider the purchase very carefully before you make any decision.

Consider what your financial goals are. Are you planning to buy the property as a short term investment or will it be a long term purchase?

If you were going to invest in the sharemarket or another type of investment, you would conduct your research. If you’re going to invest in residential or commercial property, you’ll need to do the same. The first thing you need to determine is whether or not you’re willing to do that. If you’re not willing to spend time researching the ins and outs of commercial property, then you’re best to stick with residential property as understanding the house costs and repairs is less complicated.

Commercial property on the other hand can be very complicated because you’ll need to consider other market factors. It’s not just about the property itself. It’s about the building and how likely it is that you will be able to find tenants for it in the future.

Consider your budget. If you’re living in Sydney or Melbourne, then you may find that commercial property is a much better option for you because of the upfront cost. Commercial property, depending on the number of square metres can be less than half the price that residential property is. This does have its advantages. One of the advantages would be that it means you can build up your property portfolio much faster than if you were to invest in a residential property. It also gives you the option of diversifying. Whereas you may only be able to purchase one residential property, you could potentially buy 2-3 commercial properties depending on the location that you’re looking in. That will diversify and minimise any risk you may have.

There is however the risk that if you buy commercial property you will be subject to changing employment trends and find it harder to find tenants. The reason for this is more and more people are working from home or working remotely. The smaller the office space, the harder it will be to tenant, and if the business is small, you may find yourself going through tenants more than if you were leasing to residents in a residential property.

With the heat in the Melbourne and Sydney property markets, you could find that you have more stability in residential property due to people’s reluctance to exit a lease that they’re happy with. That in turn means that you won’t need to worry about making the mortgage repayments because they’ll be sorted and more stable. You’re also less likely to suffer from any economic or business downturn if you purchase a residential property.

As with any other property purchasing decision, we recommend getting advice. If you have any questions feel free to contact the team at Aspirus Financial.