What type of property is the best investment?

When it comes to property and investment, there are several avenues to explore. The term investment differs for each individual — some seek quicker short-term wins, others play the long game. Typically it comes down to residential properties, commercial properties and short-term rentals. Here are the pros and cons of each.

1. Residential properties: a sensible investment

The most popular and generally the safest type of investment purchase. People always need somewhere to live, and with it taking longer to buy a first home, demand for rented residential homes remains high.

Pros:

• High demand for rental properties, ensuring a steady income
• Easier to finance, as banks are more likely to approve loans for residential properties
• Potential for appreciation in value over time

Cons:

• Requires active management (tenant issues, maintenance, vacancies)
• Market fluctuations can affect rental income and property value

2. Commercial properties: long-term, high return

Anything from an office building to a retail or industrial space. Trickier to get into, with more elements to consider up front, but businesses always need space.

Pros:

• Longer lease agreements, providing consistent and stable income
• Higher return on investment compared to residential properties
• Businesses are more likely to keep the property well-maintained
• Taxable benefits such as certain expenses being deductible

Cons:

• Requires more upfront and higher maintenance costs
• Complex lease agreements and management
• Longer vacancy periods whilst finding the right tenants
• Regulatory requirements to consider

3. Short-term rental properties

Whether a cottage for Airbnb or a larger holiday home, this would be considered a short-term rental — ideal if you live close to a popular tourist destination.

Pros:

• Higher income potential than long-term rentals
• Flexibility in using the property for personal vacations
• Ability to adjust pricing based on demand and seasonality

Cons:

• High turnover and increased maintenance and management effort
• Legal and regulatory risks
• Seasonal demand can result in quieter periods

Things to consider

Buying any property to rent out is a huge investment. The appropriate professionals should be contacted — from mortgage advisors to expert RICS surveyors. A RICS surveyor will provide a detailed inspection and report, outlining any potential causes of concern from mould and damp to structural damage, giving you the opportunity to negotiate on price or withdraw.