We all expect a higher return for whatever we invest in, whether it is gold, life insurance or properties. Investment in a field like real estate is a well-thought decision and rental income is an important consideration which often makes it confusing and tough.  

What gives a better rental income – residential or commercial?  A common question which comes to mind while planning an investment. But don’t worry we can help you find an answer to this question. 

Residential and commercial properties involves many risks and rewards, like investing in residential property are riskier because of a frequent change in tenants, upkeep costs and lower returns. Commercial properties are more stable because of long-term rentals, whereas residential properties have more tax benefits than commercial.  Along with this, it is also essential to examine the location, investment size and tenure, before making the final decision to invest in any property. 

What are the Benefits?

Residential- Loan facilities and leasing processes are easier in residential property compared to commercial. The holding period for returns is low.  

Commercial- It gives higher rental yield and returns. It has a long-term lease possible, like up to nine years. 

What are the drawbacks?

Residential- It gives low rental income. The investor needs to invest in interiors to make it rent-friendly.  The rental agreement usually cannot exceed over 36 months. 

Commercial- The capital values of commercial properties usually remain stable. But it is difficult to sell off as there are fewer buyers in the market for them. 

Now you know the pros and cons of investing in both the kinds of properties. It is better to be sure of what you want to invest in and for how long, as these help in analysing the better rental incomes. 

Hope this article helped you!