FeatureCommercial PropertyResidential Property
LeasesLonger leases, which has a major effect on property value. However, lease agreements can be complex and require legal/financial advice.Turnover of tenants can be higher, however residential lease agreements are simpler.
DemandVulnerable to economic shock and long vacancies. A sensitivity to changes in demands for good and services, infrastructure etc. is inherent.Demand for housing is more stable than commercial property, leading to much shorter vacancy periods.
YieldsHigher yields between 5-12% in office, retail and industrial properties mean many commercial investments are cashflow positive after interest payments. However, this often comes with much higher risk.Residential investments typically return a 2-3% yield meaning it is harder to run your investment as cashflow positive, however there is less volatility.
MaintenanceIt is more likely that tenants will sign net leases, meaning they are responsible for outgoings like council rates, insurance, land tax, maintenance, repairs etc.As a landlord of a residential property, you will be billed for any property costs and maintenance that occur.
Tenant QualityAs tenants typically pay for upkeep of a commercial property, and run their business out of it, they are incentivised to keep it in good working condition.Tenants can vary in quality and may inflict varying degrees of wear and tear on the property they are living in, some of which you may need to pay for to repair.
Due DilligenceCommercial property investements require much more research and in-depth market and economic knowledge before purchase.The process of determining a good residential investment is more straight-forward with more accessible resources.
SMSFsFor those with Self-Managed Super Funds, you are potentially able to purchase and work out of the commercial property you purchase.If purchased using a SMSF, you are unable to live in the residential property you have purchased.
FinancingAs commercial property comes with higher risk, financing often comes with stricter terms, including higher deposits (sometimes up to 50%) and higher interest rates and fees.Like finding a property, financing a residential investment is a comparatively more straight-forward home loan process.
Commercial PropertyResidential Property
Leases
Longer leases, which has a major effect on property value. However, lease agreements can be complex and require legal/financial advice.Turnover of tenants can be higher, however residential lease agreements are simpler.
Demand
Vulnerable to economic shock and long vacancies. A sensitivity to changes in demands for good and services, infrastructure etc. is inherent.Demand for housing is more stable than commercial property, leading to much shorter vacancy periods.
Yields
Higher yields between 5-12% in office, retail and industrial properties mean many commercial investments are cashflow positive after interest payments. However, this often comes with much higher risk.Residential investments typically return a 2-3% yield meaning it is harder to run your investment as cashflow positive, however there is less volatility.
Maintenance
It is more likely that tenants will sign net leases, meaning they are responsible for outgoings like council rates, insurance, land tax, maintenance, repairs etc.As a landlord of a residential property, you will be billed for any property costs and maintenance that occur.
Tenant Quality
As tenants typically pay for upkeep of a commercial property, and run their business out of it, they are incentivised to keep it in good working condition.Tenants can vary in quality and may inflict varying degrees of wear and tear on the property they are living in, some of which you may need to pay for to repair.
Due Dilligence
Commercial property investements require much more research and in-depth market and economic knowledge before purchase.The process of determining a good residential investment is more straight-forward with more accessible resources.
SMSFs
For those with Self-Managed Super Funds, you are potentially able to purchase and work out of the commercial property you purchase.If purchased using a SMSF, you are unable to live in the residential property you have purchased.
Financing
As commercial property comes with higher risk, financing often comes with stricter terms, including higher deposits (sometimes up to 50%) and higher interest rates and fees.Like finding a property, financing a residential investment is a comparatively more straight-forward home loan process.

If you’re not sure which type of investment is right for your financial circumstances, or you’re open to investing in a combination of property types, choosing a credit advisor with expertise in both commercial and residential investment lending is key to ensuring your finance maximises your investment.

Chat to us about FundingPro’s extensive experience in structuring residential, commercial and private finance here.