Real Estate is an industry that not many individuals know about. However, astute investors are now becoming educated and informed of the benefits of owning Property. By owning real estate Properties, you can be assured of a long-term income source. If you purchase wisely, you will also be able to build a portfolio of properties that consistently appreciate.
You will then have more options when it comes to your financial future. You may choose to hold onto these properties reaping regular Rental income until you choose to retire or, turn some of your properties into cash when needed.
Some of the benefits include:
- Peace of mind and stability
- Good protection against inflation
- Able to borrow more, leverage returns (good during times of low-interest rates)
- Potential for negative gearing i.e. recouping losses at tax time
Why Do People Believe That Investment In Residential Properties Is Better? Generally, this comes down to familiarity and safety. Most investors who are starting out feel that investing in residential property is easier (particularly if they already have purchased their own home).
They feel familiar with the market and prices, and as a result, they view it as a “safe” option. Whilst this is generally true, there is much to be gained from researching the commercial property market. The major benefit for investing in commercial properties is the yearly ROI.
What Is The Average ROI For Both Residential And Commercial Properties? Residential properties in India are grossly overvalued and do not have a good return on investment. Their return is between 2.4% to 4.0% approximately. On the other hand, the average yearly return of between 9.0% and 12% is to be expected from a commercial property in India. In some cities and townships, the commercial rental yield is significantly higher.
What Are The Basics When It Comes To Commercial Real Estate? Investment in commercial property is a smart move. Investors (including novice investors) are starting to recognize the benefits that commercial properties bring. Investing in commercial property in India requires careful research and planning. An investor must consider what commercial property type they favor as well as what type of property that will yield the best return.
Factors such as location, demographics, infrastructure and emerging industries also need to be considered. There are three types of commercial properties that an investor can purchase these include; retail, office and industrial. Whilst commercial property presents a much better option for investors in India, it is not without risk.
Why Does Investment In Commercial Properties Make More Sense? In India, Chennai, Pune and Bengaluru office rental has an on-year growth of 8-17%. Bengaluru commercial rental property market has experienced the main growth of 17%. This is a rapid growth rate and shows just how lucrative the commercial property market is
The major benefits of investing in commercial properties are -111Higher rental yield — as previously mentioned, the rental yield is between 9.0 and 12% which is significantly higher than many countries around the world. -Low vacancy periods — there is a high demand for office rental meaning investors can expect a steady flow of monthly income. -111Longer lease — tenants will sign leases over several years instead of 6-12 months which is typical in the residential market.
In terms of risks, longer leases mean that if you take on a problem with a tenant, you are stuck with them for several years. Further, an economic downturn can mean commercial rental properties may be on the market for longer. Therefore, it is important to weigh up the pros and cons of purchasing commercial real estate and coming to your conclusion before you put any money down.