Investing in property is a big step and for most people it’s less of a stretch to stay in the residential sector because it’s familiar territory.

However, for some investors, there are advantages to be found in moving outside their comfort zone and into the commercial sector.

Commercial property  investment will suit investors who are willing to take bigger risks for bigger returns and who appreciate a fuss-free longer-term tenant. Residential investment, on the other hand, might deliver lower returns and demanding clients, but it’s the safer option.

While real estate investment is never guaranteed, commercial property investment can certainly be a lucrative one.

The Australian Centre for Financial Studies (ACFS) has stated that investment returns in the Commercial Property sector have outperformed nearly all other asset classes over the past 30 years.

The ACFS estimates the local commercial property market to be worth around $354 billion, making up around 5 per cent of Australia’s total investment market.

In commercial property the average return is quite high, anywhere from 8%-10%. The return in a residential property will be between 2%-4%. The high return comes at a price, of course – it’s riskier. While Commercial property reflects the economy, it’s segmented, so rates of return will depend on where you choose to invest.

Once you’ve made the decision to jump into commercial property investment, find an agent who can keep you in the loop and help you get familiar with the market. Making the right decision first off is the best way to reduce your investment risk.

 

Where to Invest: Residential Versus Commercial