Residential vs commercial properties: guide for landlords

Residential vs commercial properties: guide for landlords

To buy or not to buy, that is the question. Or at least it is when it comes to investing in property.

Owning residential and commercial real estate can be a great source of income and a secure investment for your future. However, the residential and commercial property sectors are very different and you’ll likely be more suited to one over the other. Commercial property investment can be more profitable, but you need more money for the initial outlay and you’ll spend more time on all the paperwork and administration.

Here, AXA explains the main differences between being a commercial landlord and a residential landlord and discusses the pros and cons of both options to help you decide what’s right for you.

What’s the difference between commercial and residential properties?

If you’re thinking of investing in residential or commercial property, it’s important to understand the difference between the two so you can make an informed decision. Essentially, a commercial property will house a business and a residential property will house people.


Residential property definition

A building usually intended for individuals or families. This includes flats, terraced houses, semi-detached and detached houses.


Commercial property definition

A building used solely for business purposes. This includes properties like offices, restaurants, medical centres, shops and medical centres.

So one is for solely for people and one includes a business, but what does that really mean for landlords? How will investing in commercial property differ from a residential property investment? Check out the table below for an overview of the typical differences an owner might expect from the two.

*Maintenance costs and payment terms are usually agreed in the tenant contract and can differ on agreement or depending on location.

Residential vs commercial: Pros and cons

As with any big decision, it’s good to weigh up your options and writing out the pros and cons is a good place to start. Here are just some of the advantages and disadvantages to buying commercial property vs residential property to help you decide what would best suit your budget and lifestyle.

Residential landlord

Use the drop down buttons to learn more about the pros and cons of being a residential landlord.



Commercial landlord

Use the drop down buttons to learn more about the pros and cons of being a commercial landlord.



How to invest in commercial property


So you’ve decided to embark on a new challenge as a commercial property landlord, what are the next steps? It’s not as straightforward as buying a house or a flat and being a residential landlord. Firstly, you’ll want to understand the market in the area where you want to buy a commercial property. For example, if you were planning to invest in a hospitality building but the area is saturated with struggling restaurants and cafes already, you might want to re-think your investment.

Next, you need to decide how you’ll get on the commercial property ladder because there are a few different ways you can go about this. You can typically invest directly by buying the property itself, or by investing in a fund which owns physical property. Alternatively, you can invest indirectly by investing in a fund which holds shares in a property development or householder. 

Direct investment:
Involves buying the property itself or buying a share in the property

Direct funds:
Also known as bricks-and-mortar fund, this is a collective investment scheme where you invest in physical property. It’s a common way to invest in commercial property you might not otherwise be able to afford. You’ll invest directly into a portfolio of properties such as offices or shops.

Indirect funds:
This is a collective investment schemes where you invest in the shares of property companies listed on the stock market. Unlike direct investment, property shares fluctuate with the stock markets.

If you decide on making a direct investment in commercial property where you’re the landlord of the building, you’ll need commercial landlord insurance.

What's covered by AXA’s commercial landlord insurance?

With commercial landlord insurance from AXA, you’ll get peace of mind and protection for your investment. As standard, you’ll get:


Protection for up to 10 properties


Underground pipe and cable cover


Property owners' liability for up to £10 million


Trace and access cover to find the source of leaking pipes


Glass and keys replacement cover


Cover to re-house any residential tenants if your property can’t be accessed or lived in due to damage

Commercial landlord insurance in just a few clicks

Whether you rent out offices, shops, warehouses or surgeries, we’ve got you covered with our commercial landlord insurance.