Making the right choice
June 8th, 2015 by Geoff Baldwin
When it comes to a wise investment, not all property is equal.
You may consider land to be low maintenance but, although there is no house to maintain, you miss out on rental income and there is absolutely no tax relief at all. We do not recommend land as the best investment choice!
What about commercial/industrial properties?
Well, the argument is that the commercial tenant pays more of the expenses and therefore will give you a better return. This may be essentially true but it’s also a fact that commercial/industrial investment is a much higher risk and very specialised field.
Regardless of the state of the economy, people always need a roof over their head so residential property may be a more reliable investment. Even in good economic times many businesses fail to prosper and are forced to close leading to vacant shops, warehouses and factories. The proliferation of closures in the banking sector over recent years, demonstrates that even “blue chip” tenants can let you down and leave you without income.
It’s also important to understand that the value of commercial premises is based primarily on the return from their lease. You will always pay a higher price for a better tenant, which means that, if you lose your tenant you also lose value and equity.
First time investors should consider and balance these risks carefully before making their choice. Importantly, tax deductions can only be claimed on income producing properties!