Differences between Commercial & Residential Property Investment

Commercial Property completely differs from residential property. The buying process, rates, rules, benefit, profit, policy, terms, locality, and formalities of commercial properties are different from those of residential properties. So, before investing in property, you should know all the pros & cons of both types of the property.

Investment in commercial property is full of exciting opportunities of profits. The basics of investment in commercial and residential property are same. Below are some key differences in commercial and residential properties:

Rent/Lease Period:

Commercial property can be rented out for longer period rather than residential property, which gives a certainty of rent income for long time. Commercial property can be leased or rented out for several years rather than 8-12 months. Commercial property rent tends to be reviewed annually, which gives an opportunity to increase rental income. The tenant for residential property can be found easily without waiting for long time. In case of commercial property investor has to wait for long period to get tenant for the property.

Tax on Property:

GST (Goods and Services Tax) have to be paid when buying a commercial property, but investor can recover this tax by including it in rent price of the property, Means, investor can impose this tax on tenant of the property.

Maintenance Cost:

The maintenance cost of commercial property is paid by the tenant, means landlord gets the complete profit of rent. Landlord/investor can impose this cost on tenant. As investor you must be sure about the maintenance cost so that there should not be any future dispute regarding the cost. in the case of residential property mostly everything is fixed in the rate of property rent.

Locality of Property:

The location of commercial property and residential property differs a lot such as location requirement of commercial property includes good transportation, big parking space, availability of manpower, easy communication, etc. But, when we talk about residential property, it includes amenities like park, schools, hospitals, consumer market, malls, security, transport, etc

Property Loan:

Process of getting loan for commercial or residential property is not similar to each other. Loan for commercial property includes various requirements, TC and policy. The interest rate of commercial property is also higher than residential property. Commercial property loan process is much time consuming, you need to map out your time before apply for loan.

Initially you need to a property so that you can invest at right place. Analysis of all differences between commercial and residential property must be done if you are confused with your investment decision.

Renowned property dealers of metro station can turn out to be an expert of real estate sector. Consultation with those property dealers cans strong your decision power of buying a property.

This post is only informative, it doesn’t relate to any legal advice.

Sources of Getting Commercial Property Loan

Buying commercial property is not an easy task. Many things have to be calculated, researched & analyzed before purchasing a commercial property. The cost of commercial property is more than residential property. So, finance is the big barrier in buying the property. To remove this barrier, majority of business entities choose an option of loan, though getting loan is also a big task.

There are many ways of getting loan. May finance entities or individuals are there to finance your property requirements. Below are the some examples:

Mortgage Banking Firm:-

Mortgage Bank, a state-licensed banking entity, provides mortgage loan directly to the consumer to purchase a real property.

Saving and Loan Institution:-

Savings and loan institution association, or S&L, is a financial institution that specializes in making mortgage and other loans.

Regional Bank:-

Regional banks are also there to provide loan to consumer. Although regional banks have some limitations to provide loans or other services, it will not be a trouble to get loan from a renowned bank. Despite having limitations, these banks can manage to provide you a good amount of loan.

Private Investor:-

Contact private investors. Some individuals are very wealthy and provide loan to others to purchase property or commence small business. The benefit of getting loan from a private investor is that you need not have to get into much more tension of loan documentation formalities.

When buy commercial property, bank is the most popular way among the above mentioned options for financing a Commercial Property. When banks are giving loans, they have a list of some requirement that is supposed to be fulfilled by the consumer to provide security and assurance against the loan. Following are the some common requirement of banks:

·         Commonly banks do not finance more than 75% of the value of property.

·         The applicant must be above 21 years old

·     The assurance can be supported with a debt-repayment ability of property by a ratio of 1:20X or higher. Debt Repayment Ratio can be calculated as Net Operating Income / Total Annual Debt Burden.

Take care of fraud agents or small finance entities that are experts at making fool out of you by taking some advance money as a loan processing fee or some other tricks. After getting money, they direct you towards fake deal. Some property dealers in Delhi are worth trusting to deal with them.

This post is only informative, it doesn’t relate to any legal advice.