What type of property should you invest in?
In most cases investors start in residential property as they have usually already been through the process of purchasing their own home or been a tenant in the rental market for a long period. However narrowing down your investment decisions so early without thinking about the potential in other sectors can be detrimental to your future business.
Any serious property investor would likely consider commercial and industrial property in addition to any residential property. Depending on the market climate it may be a wiser decision to pinpoint a sector that has the potential for more growth. If for example the residential prices are overheating, then it may be wise to avoid that sector for the time being.
When considering what type of property you want to invest in, then you must consider the cash flow outcome that would best suit you, the capital gains implications and other returns. Commercial property can in some cases be more beneficial than a residential investment. This is due to the tenants being required to pay the majority of the outgoings. This is in contrast with a residential property where the landlord will pay all the insurance and rates and other expenses from their own business.
There are certain restrictions with lending for a commercial or industrial property that is different to a residential property that must be taken into account in addition to the above mentioned items. Further to this, it can be harder to find a tenant for a commercial or industrial property and the leases generally tend to be shorter in nature.
In summary, all 3 sectors have their merits and disadvantages. What this article wishes to emphasize is to think outside the ‘residential first’ outlook and consider other options that may be better suited to your business goals.
For further advice contact Alert Property Group.