Hi Gina,
Today I had another nasty experience with overseas residential properties. The developer (Megaworld) just told the owners about some extra/new restrictions on rental, so owners must pay extra or find new tenants. I feel there are lots of restrictions on residential property rental. In contrast
- If the residential property is managed by a big service company like BridgeClub or Ascott, ideally appointed by the developer, then those restrictions would be taken care of.
- If the property is commercial such as hotel, office or shop, then the restrictions would be taken care of by design. Fewer surprises.
This is one more reason that I prefer commercial rather than residential. Other reasons:
- commercial tenants are more long-term
- /prolonged/persistent/ vacancy is less likely at commercial (esp. top quality) units than residential units.
- Condo fees are charged even when unoccupied. In the same location, commercial units are more likely rented out. In the scenario that a commercial is rented out but a residential is vacant, then the condo fee would hurt.
I think many investors in the residential market are attracted by asset appreciation (or windfalls) but I don’t want to rely on the promise of appreciation. I have reason to believe that if rental yield is reasonable, then appreciation would be likely.