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1. Commercial v/s
Residential Properties in
UAE
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2. Introduction
In UAE, the real estate market is mostly composed of buyers and sellers, with both
commercial and residential real estate considered as great investment option.
And both of these have a great impact on the net worth.
However a, vast majority of people only prefer residential properties for investments
rather than the Commercial.
A residential property comprises of apartment buildings, flats, individual houses or
multi family homes condos and co-ops.
And Commercial property comprises of all the non residential buildings like offices,
retail shops, and other industrial units or factories, etc..

3. Difference between Residential
and Commercial Properties

4. Residential Properties Commercial Properties
Residential tenants are available
regardless of the economic condition.
This is because most people want to live
and rent in places close to their friends,
families, job location, educational
institutions, etc.
Investing in rental homes also guarantee
s available cash flow and easier to rent.
Even if a tenant leaves, there are always
new tenants coming in.
Commercial properties tend to be more
lucrative than residential because of
steady returns and better cash flow.
The lease document itself is quite long
and contains many clauses. You need to
study the lease carefully and understand
the terms with the help of a competent
lawyer.

5. Residential Properties Commercial Properties
Furthermore, it is easy to sell hous
es than commercial lots because
demand from buyers is always there.
House rentals are determined by
comparable market rates of similar
houses in the area. Tenants pay
their rents on a weekly or monthly
basis depending on different
countries.
The lease period are longer than
residential, which translates into
guaranteed long-term cash flow.
Landlords can lease to a tenant for a
specific length of time (e.g. 5 years)
and then have the option exercised
by the tenant to renew the lease for
another period of 5 years.
Tenants in commercial properties
usually pay expenses such as repairs
and maintenance. This is because
tenants want to run their businesses
as good as possible.

6. Residential Properties Commercial Properties
The value of a residential property
is calculated by comparing the
market price of similar properties in
that location. An appraiser is respon
sible for estimating the value of a
house.
It is possible to buy a residential p
roperty with a small down payment
and getting 90 percent or more
mortgage financing from the bank.
Unlike residential, leases are very important
as these documents determine the price, value,
and most importantly the rents of a commercial
property. Tenants who have long-term leases
can significantly improve the value of the
property.
Since most commercial tenants run their
premises for business purposes, a drop in the
economy may cause many problems, resulting
in loss of income and eventually loss of
businesses.

7. Residential Properties Commercial Properties
Rental lease is fairly standard,
short and easy to understand.
Landlords and tenants should not
have difficulty in understanding
these documents.
Residential and commercial
properties tend to have different
lease periods. The length of the
lease for residential is short (1 to
2 years) and tenants can extend th
eir stay or leave when the lease
expires.
Another advantage for commercial
leases is that you can add clauses
and conditions when necessary,
provided the condition benefits both
you and the tenant.
Besides, the leases are reviewed at
the end of the each period for either
renewal or termination. Except for
unforeseen circumstances like
bankruptcy and poor sales that lead
to tenants leave, most are willing to
renew for long periods.

8. Benefits of investing in Commercial Properties
Substantial Current Income and Spendable Cash.
One of the biggest benefits to Commercial Real Estate Investments is that the assets are
generally secured by leases which provide a regular income stream, significantly higher
than typical stock dividend yields.
Excellent Appreciation of Asset Value.
Commercial Real Estate Investments have historically provided excellent appreciation in
value that meet and exceed other investment types. Properties generally can go up in
value from internal factors such as proactive management – making cost-effective
improvements to the property that improve the usability and desirability of the asset,
and external factors such as supply and demand imbalances.

9. Accumulate Significant Equity through Leverage
Another important characteristic of commercial real estate investing is the
ability to place debt on the asset which is several times the original equity.
This allows you to buy more assets with less money and significantly magnify
your equity as the loans are paid down.
Multiply Current Cash-Flow through Leverage
When investors place “positive leverage” on an asset, they effectively
Multiply their net spendable cash by borrowing money at a lower cost than the
ir property returns back to them. A quick example: your friend loans you $10
and asks for $11 back, one dollar interest….you immediately loan that $10 to
someone else and ask for $2 interest…paying back the $11 owed and making
a profit with no additional investment…you just participated in positive
leverage. This happens all the time in commercial real estate investments.

10. Benefits of Investing in Residential Properties
Expenses, including interest on your borrowings, are tax deductible.
You make money as the value of the property increases.
You can leverage your investment.
You get rental income.
For people who can't save, paying off a mortgage is an enforced savings
programme.

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