Need a Mortgage Broker for an Investment Property?

Investing in commercial property can be very lucrative, but as an investor, you need to be aware that the process works differently from a residential application. For a safe investment plan, it is better to know the market well and know the pros and cons of commercial and residential property investments.

Please call First Choice Mortgage Brokers to discuss your Investment Property opportunities and for any assistance in accessing the Investment Property application process.

When purchasing either a residential or commercial property, it is important to factor in the suburb’s location and infrastructure. Suburbs offering shopping centres, railway stations and good schools will affect your investment value positively.

Commercial Property

  • Are generally leased for longer periods of time
  • A commercial lease holder generally tends to keep the commercial property in better condition as the property is very important to their business image
  • Maintenance costs are generally paid by the lease
  • The application process for a commercial loan is a lot lengthier, and if the property is not let when you are purchasing, it could be subject to GST
  • Properties tend to appreciate in value by around double every 7 to 10 years

Residential Property

  • Residential properties are generally easier and quicker to rent
  • Interest rates on residential mortgages tend to be lower
  • You usually need a smaller deposit to purchase a residential property – and you can even borrow up to 100% of the purchase price in some cases

Commercial vs Residential
Investment Properties
FAQs

Which is a Better Investment, Residential or Commercial Property?

Both types of properties return good investments, although each have their own pros and cons, so there is no correct answer to which investment property is better. While commercial properties tend to offer higher profits between 5% and 12%, compared to residential properties, which returns a 3-4% profit. But commercial properties are riskier and more vulnerable to external influences.

Generally, financial advisers recommend if you are new to property investment, buy a residential property first. Then for more experienced investors with multiple established investment properties, it may be a good idea to take the next step into the commercial market.

Is Commercial Property More Expensive Than Residential Property?

A common misunderstanding of commercial property investments is that they are much more expensive than residential. While high-rise offices and big-box retail units often sell for tens of millions, the commercial market provides a more diverse variety of price points.

A carpark may be purchased for as little as $80,000 or a well-located office for about $400,000. The same sum of money could buy you a three-bedroom home depending on where you live. However, assuming you find a dependable tenant, an office investment will almost certainly give you a far higher yield.

Which Commercial Properties Return the Highest Profits?

  • Properties with a high number of tenants, as the more tenant you have living on your property, the greater your income will be. Such as RV Parks, Apartments, Student Housing, Office Buildings and Storage Facilities.
  • Properties located in areas with growth, high traffic and are in demand, as these areas are more likely to attract tenants.
  • Properties with triple net leases, which are properties that are usually single-tenant spaces as those tenants are also more likely to sign a long-term lease.

How Do Commercial and Residential Mortgages Differ?

The application processes differ greatly depending on whether you are buying a commercial investment property or buying a residential investment property. To purchase a commercial property, you would apply for a business loan rather than a regular home loan, and you would most likely be required to include a business plan and profit projections to obtain one.

You will also need to save a more significant deposit to purchase a commercial property – usually, a minimum of 30% of the property’s lender-assessed value – as well as pay higher interest rates and administrative costs for these loans because banks typically deem commercial as a higher risk.

Speak to a Mortgage Broker

You can make an appointment with a First Choice Mortgage Broker consultants by calling 1800 111 455.

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