Hi

Wanted to discuss the relative merits of investing in commercial vis-a-vis residential property around the below lines

- Rental yields and capital appreciation
- Ease of entry/exit (ability to source/ticket size/turnaround time)
- Ease and cost of financing
- Vacancy risks/maintenance issues
- any other items

Would appreciate if someone can enlighten on the same.

Thanks
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  • Originally Posted by jyotikrag
    Hi

    Wanted to discuss the relative merits of investing in commercial vis-a-vis residential property around the below lines

    - Rental yields and capital appreciation
    - Ease of entry/exit (ability to source/ticket size/turnaround time)
    - Ease and cost of financing
    - Vacancy risks/maintenance issues
    - any other items

    Would appreciate if someone can enlighten on the same.

    Thanks



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  • thanks anees. very useful. some additional comments to take the discussion further.

    - while its more difficult/time-consuming to get commercial property into lease, the churn is however much lesser. so guess the higher vacancy period risk whenever it happens is somewhat compensated by less frequent vacancies in the first place ??
    - on the exit front...while the short-term duration of the residential property leases provide for relative ease of selling once the lease period has expired, dont commercial property provide additional ease of exit as they can be sold on a rental yield capitalization model to other investors even when they are still under lease?? or i am theorizing here and practical experience is to the contrary?
    - also any idea of comparative rental yields and like capital appreciation between the two type of properties generically speaking under the Indian circumstances
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  • Hi,

    More addition to the above discussion

    1. Leases tend to be much longer – anything from three to 20 years - and they are quite often secured by bank guarantees which makes them a secure investment.


    2. Rent is reviewed annually and is usually increased either by the CPI or by 4%, whichever is the greater.


    3. Commercial tenants will also tend to maintain the property better as the look and condition of the property is important to their business and their staff. But commercial leases also have added protection for the owner in the form of make good clauses, maintenance clauses and management clauses.


    4. The return on invested capital on commercial properties ranges between 7% and 10% net after all costs.
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  • Hi any new takes on this discussion is buying commercial space in a mall like tgip a better option than buying residential property.
    What is the appreciation potential of such property
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