Should You Invest in Commercial Or Residential Properties To Generate Rental Income?

By : 360 Realtors

12 May, 2023

Planning to invest in the real estate sector to generate a consistent source of income? Well, you might be in a dilemma over whether to invest in a residential or commercial property. Both these segments in real estate offer lucrative rental returns. However, before channelling your funds, consider the location, operational costs, and ease of finding tenants.

So, if you want to generate rental income, it pays to go for a commercial property. The returns on investments for commercial properties are typically higher compared to residential ones.

What makes commercial properties a better investment avenue?

1. High demand for commercial properties

India has got a booming economy, and the demand for commercial spaces is consistently on the rise in all the cities. Property price appreciation further contributes to the high returns. Besides, investors manage to diversify their asset portfolios by purchasing commercial properties. Even when the real estate industry undergoes a downturn, businesses and MNCs would be expanding in the commercial sector. This fuels a high demand for commercial properties in the country.

2. Longer tenancy period

Compared to residential properties, the tenancy periods and rental yields for commercial properties tend to be higher. This enables investors to stream in a steady flow of income. For commercial properties, the lease tenures range between 5 to 10 years, or even more. This helps investors stabilize their income from these properties.

3. Tax benefits

One of the commonly overlooked benefits of investing in commercial real estate is the tax advantage. Property owners can enjoy a deduction of interest on property loans and depreciation. These savings contribute to their long-term financial growth.

4. Growth potential

Compared to residential properties, the growth potential is higher in commercial estates. The reason is, these properties are strategically located in areas undergoing economic growth. Mostly, real estate experts recommend investors to purchase commercial properties in prime technology hubs and business districts.

 Investing in retail spaces, office spaces, and self-storage facilities would be an intelligent decision indeed. Commercial real estate investments have proven to yield better returns compared to residential properties.