How commercial property investing differs from residential
Both commercial and residential properties in Mount Isa can be great investments in terms of generating capital growth and income. But there are some key differences that you need to understand before you decide whether to invest in commercial, residential, or both.
How commercial and residential property investment is similar
Before we focus on the key differences, let’s first take a look at the similarities. Both of these broad types of property investments usually require:
- significant upfront capital to buy (usually via property loans).
- ongoing expenses (like council rates, insurance, repairs and maintenance).
- the effective sourcing and management of tenants if you decide to rent the property rather than using it (commercial) or living in it (residential). You can outsource this task to a professional property manager to save time and hassle).
In addition, if you rent commercial or residential property out to tenants, you can reduce your tax bill by claiming tax-deductible expenses against your income. Common tax-deductible expenses for investment properties include council rates, insurance, repairs and maintenance (provided that you pay these expenses and not your tenants).
The key differences
The key differences between commercial and residential property investing relate to the types of properties and tenant leases. Let’s look at each difference in turn.
Types of property
Types of residential property investment includes freestanding houses, townhouses, units/apartments, and residentially zoned land.
Commercial property investment on the other hand includes:
- industrial/warehouse space
- retail space
- office space
- accommodation complexes
- commercially zoned land.
Leases
Commercial property leases tend to:
- be longer than residential property leases.
- generate higher rental income than residential property leases (though this obviously depends on the characteristics of the property).
- have regular rent increases or reviews built into the terms and conditions.
- be more negotiable than residential property leases. For example, you may need to offer high quality tenants incentives like rent-free periods or short-term discounts to entice them to sign or renew a long-term lease.
Commercial property tenants are also more likely than residential tenants to pay some or all of the property’s ongoing costs, though this depends on the terms and conditions of the lease.
In addition, commercial properties tend to have longer vacancy periods than residential property, though once again this depends on the property. That’s because businesses looking to lease commercial properties tend to have very specific needs.
However, the good news is that once you find suitable commercial property tenants, they are likely to stay longer than residential tenants.
The Mount Isa commercial property market
Mount Isa has a strong commercial property sector for mining and a range of services (including transport, mechanical repairs, retail stores, wholesalers, hotels, restaurants/cafes, health and education).
Forecast growth industries for the future include:
- minerals processing,
- transport and logistics,
- irrigated agriculture,
- non-conventional petroleum and gas exploration,
- precious metal and rare earth exploration, and
- tourism.
Commercial property buyers can come from anywhere due to the global nature of Mount Isa’s most dominant industries. Market prices vary considerably depending on the type of commercial property asset (i.e. whether its industrial/warehouse, retail or office space, accommodation complexes, a business that’s for sale, or commercially zoned land), its size and location.
A range of Mt Isa commercial properties are currently available to buy or lease.
About Us
Jays Real Estate has been Mount Isa’s premier residential and commercial real estate agency since 1981.
If you’re thinking about leasing, renting, selling or buying any Mt Isa property, or you need your investment property managed, then contact our team today for an obligation-free chat!
We’d be happy to provide you with advice and to answer any questions you have.