Real estate is a wide spectrum industry with many different types of properties that are available catering to different purposes. The residential property is for the living communities and the commercial property is for the businesses. There are further breakdowns of categories under these divisions that define the utility of a specific space.
When investing in commercial property, there are advantages like the risk factor being very low because of the government measures. The assurance of yields is more and offer long lease periods with fewer volatilities. This creates a potential of good returns only after a long-term investment duration. However, entry-level fundings might be higher.
When investing in residential property, the entry-level funding is comparatively lower at times. The loans for buying homes are easy to get, with the procedures that are simple to acquire the lease. The potential to get the returns on the property is more in a lower holding duration. However, the yields that home buying gives, is lower than the commercial property investment. There is always additional costs like the interior developments, the rental agreement has a shorter tenure and the market volatility is high.
Commercial property investment has a sturdy structure of the lease terms for the tenants, which creates a steadier funds flow causing a low risk factor for the investors. This could be a decision changing factor for many people since the residential property investment has a higher risk factor of an unstable fund flow due to the tendency of drastic changes in the market requirement.
Residential property investment is still to grow further till it begins giving better yields even though it has a fast recovery. There are advantages like the tax benefits, but it is difficult to profit out of it after paying good maintenance fees on those taxes. The purpose oriented to the residential property is of a end-usage or furthermore, an upgrade to it. This is also one of the many reasons which could cause investors to choose investing in commercial real estate.
To conclude, both the streams of real estate have their individual benefits and difficulties which vary as per the intents of the investors. If you are looking for a long-term stable output of your investments, then commercial property is what you should opt for, however, if your fundings are limited, then residential property is a smoother way into the real estate market. You can evaluate which category is better suited for you, if you understand what are your conditions and how eligible you are for them.