The distinction between two investment avenues, shares and commercial property, does not get much coverage. While much debate revolves around these lucrative routes of supplementing one’s income, the unique dynamics of shares versus commercial property remain relatively unexplored.

In this blog post, I will attempt to break down the intricacies of these two investment avenues.

Shares: A brief overview

When we talk about investing in shares, we are essentially buying a piece of a company’s ownership. Whether it’s a startup or a well-established corporation, as shareholders, we are part owners of the business.

However, the catch is that, unlike property, we lack control over the company’s direction unless we hold a significant stake. Shares offer the potential for capital growth and dividend income, making them an attractive option for many investors.

Commercial property: A unique perspective

Now, let’s shift our focus to commercial property. Investing in commercial property has some similarities with investing in shares, as both involve putting capital into a business.

However, in the case of commercial property, you not only own a physical asset but also collaborate with a tenant. This collaboration is crucial for maintaining a symbiotic relationship – the tenant continues to thrive in the space, ensuring a steady rental income for you.

Shares vs. commercial property: The control factor

One of the critical distinctions between shares and property is control. While shares might leave you with little control over a company’s trajectory, commercial property empowers you to influence your investment actively. Whether it’s choosing tenants, renovating, or expanding, you hold the reins. This gives you a sense of security and control over your investment.

Income streams: Dividends vs cash flow

Shares generate income primarily through dividends, which are a share of the company’s profits. However, this income is often modest, especially when considering expenses and overheads. On the other hand, commercial property stands out with its strong cashflow potential. The rental yield received can cover loan repayments and property-related costs, creating a neutral or positive cashflow scenario. However, while dividends are offered subject to the discretion of the company, rental yields are a sure and regular source of income.

Leverage and growth:

Leverage plays a significant role in both shares and commercial property. In the share market, margin lending allows for leveraging up to 50% of the portfolio value. In contrast, commercial property can be leveraged more extensively, with loans ranging from 65% to 80%. This significant leverage, coupled with the property’s steady growth and cashflow, positions commercial property as a more stable and consistent long-term investment.

Security and stability: Commercial property’s edge

One of the primary concerns with shares is their vulnerability to market fluctuations, economic downturns, or company-specific issues. Commercial property, with its steady income, growth potential and ability to weather economic storms, emerges as a more secure option. The risk associated with commercial property is mitigated by the property’s tangible nature and the ability to replace tenants swiftly if needed.

Decoding the investment puzzle

In the grand scheme of shares versus commercial property, the choice ultimately depends on your long-term goals and risk tolerance. Diversification is key, and both avenues offer unique advantages. However, when seeking a balance of steady growth, consistent cashflow, and the ability to leverage for future investments, commercial property often proves to be a winning formula.