When you buy a residential property it doesn’t matter if you have a tenant or not because sometimes you prefer to have a property that has no tenant. This could be because you want to refurbish that property, you want to uplift the value, and you want to sell it back into the market or if you want to demo it then it makes perfect sense to have a property with no tenants.

Sometimes having a tenant can be a hindrance and they can even destroy your residential property a lot faster than they can your commercial property. 

So what’s the importance of having a tenant?

In residential it’s not important at all because tenants are everywhere and all you have to do is drop the rent by about AUD 50 a week and you’ll get a tenant. You might not always get the best type of tenant because residential tenants are in transit. 

When you have transit tenants they treat your property like a hotel and if anything breaks they get you to fix it. What this means is that if the light bulb breaks, the taps leak, or if the toilet’s broken they’re going to ask you to fix the problem and end up chewing up your cash flow. So your residential is bleeding your cash and your tenant is causing it.

If you have a tenant in your AUD 2 million residential property you’re supporting and subsidising your tenant’s lifestyle. Consider the money you have to pay for the maintenance of that property, all the outgoings and the mortgage and your tenant pays a pittance to be able to live in the luxury of your house. 

Also, think of the fact that they don’t treat your property as if it’s their own. They don’t take care of it and they expect you to take care of it while they live there because you’re a wealthy landlord. This is the mindset of tenants when you have a residential property and that’s why having a tenant isn’t always a positive experience but what’s worse is when a tenant is paying you rent and you’re still losing money in your residential property.

The biggest difference a tenant makes in residential vs commercial 

With commercial property, tenants are like gold and you have to work with your tenants because you create wealth together. The reason you do that is because your commercial tenants are paying your rent but they’re subsidising your lifestyle because their rent is going to cover your mortgage repayments plus give you cash flow and they pay outgoings on top of it. 

That’s not all. They treat your premise as if it’s their own which means that they take care of it. All of those maintenance costs that just eat away at your cash flow from your residential don’t happen in commercial because your tenants take care of all of that so you end up putting more money into your pockets giving you more cash flow to save up for the next property.

Fundamentally, commercial tenants are scarce and are much harder to find than tenants in residential but once they’re found they stay in your property for a long time. So where residential tenants can move within 6 to 12 months or 18 months every time their situation changes or they don’t treat your property as their own. 

Commercial tenants spend a lot of money but residential tenants don’t do that. Imagine a doctor, for instance, who’s coming into your property or an industrial tenant putting in new desks or adding beautiful flooring or new air conditioning. They’re investing in your property and their own business. 

But even though tenants are scarce in commercial property once they’re there, they are in it for the long term. A lot of tenants in a commercial property stay for a minimum of 5 years but they may even stay for 10, 15, 25, or even 35 years because it suits their needs and it costs them a lot of money to get started.

So the fundamental difference between residential and commercial when it comes to tenants is that tenants can cause a lot of problems and could make you lose money in residential but they are plentiful and they tend to destroy your property.

With commercial property, tenants are like gold. They’re scarce but once they’re found and they’re in your property, they heavily invest in your property, they put all of their efforts into creating value for your property. 

It’s time to invest in your financial freedom

With any property rental, there’s going to be some wear and tear that can impact the look and value of your property—but the right tenants can fix this problem. If you’re looking to secure long-term tenants who take care of your property and add value to it by installing features that beautify your property then commercial property tenants are the best option.

But if you’re still unsure about how to find the best tenants then speaking to a leading buyer’s agency can help you find the right long-term tenant for your property.