Everything You Need to Know About Residential VS Commercial Investment in Egypt
February, 2023
In light of the current economic crises Egypt is going through and the wave of price hikes that is currently sweeping across the market as a result of the devaluation of the Egyptian pound that has reach a peak of EGP 30 against the dollar, many people are looking for the best ways to save the value of their money as a guarantee for their future. Some are choosing to invest in bank certificates, and others are investing in gold, but the majority of people prefer to invest in real estate, which is considered one of the best and safest forms of investment in Egypt.
There are many types of real estate investment in Egypt, including residential, commercial, administrative, and industrial. In the following, we will highlight everything about residential and commercial investment and the benefits of each.
Residential Investment
Residential investment means investing in buildings used for residential purposes and dedicated for the residence of individuals or families only. Among the types of residential properties are apartments, duplexes, studios, townhouses, twin houses, villas, and chalets. Investors of these types of properties can either lease the property or sell it shortly after being purchased.
Benefits
There are many benefits investors will reap from investing their money in residential properties, including:
• It is easy to find a buyer or tenant, as residential properties are always in high demand. This is due to the fact that people always need a place to live.
• With the increasing number of foreigners coming to Egypt every year, the demand for residential properties are always on a rise, with foreigners eager to rent properties during their stay here and some looking to increase their profits through real estate investment – a concept referred to as real estate exporting.
• It is easy to sell these types of properties, especially if they are located in a lively area close to famous destinations.
• The cost of this investment is much lower in comparison to commercial investment.
• The return on investment (ROI) ranges between 5% and 7% annually.
• The rental period extends from 1 to 3 years and sometimes can reach up to 5 years.
Additional Information
• The property owner deals directly with the tenants and doesn’t need to hire a property management company, as its cost will be more than the rental fees.
• The property owner is responsible for maintaining and repairing any damages caused by the tenant before renting the property again.
Commercial Investment
Commercial investment means investing in properties not used for residential purposes. In addition, it is a type of real estate investment that investors turn to for business-related purposes. Among the types of commercial properties are offices, shops, trade markets, commercial centers, malls, stores, warehouses, and commercial plots
Benefits
There are many benefits when it comes to investing in commercial properties, including:
• The rental period extends for a longer period of time in comparison to residential investment which can start from 3 up to 10 years.
• The return on investment (ROI) ranges between 6% and 15% annually, which is higher than the ROI of residential investments.
• The property owner is not responsible for any maintenance or needed repairs. The tenant is the one responsible for any necessary upkeeps and will implement it in a manner that suits his business best.
• The property owner does not directly deal with the tenants in regards to their problems or rent collection. All these matters are to be handled by a property management company.
Additional Information
• Investors in commercial properties must have the financial ability to handle the high costs of such an investment.
• Some people rent commercial properties, but the percentage is not that high in comparison to residential properties.
Tips Every Investor Should Consider
There are many tips you should consider before investing in residential or commercial properties, including:
1- Choose a property that enjoys a strategic location near well-known destinations and public transportation.
2- Invest in newer cities such as 4G Cities, which are considered the future of real estate in Egypt.
3- Do extensive research and study the real estate market well before investing.
4- Compare prices in different projects and choose the most suitable for you according to your budget.
5- Choose the right time to invest in a property to gain the highest ROI possible.
6- Work with a professional real estate agent who can help you choose a suitable property.
A Comparison Between Residential & Commercial Investment
| Point of Comparison | Residential Investment | Commercial Investment |
|---|---|---|
| Demand for Properties | High | Not high as residential properties |
| Cost of Investment | Small | Large |
| Average Annual ROI | 5% - 7% | 6% - 15% |
| Rental Period | 1-5 years | 3-10 years |
| Dealing with Tenants | Property owner deals directly with tenants | Property owner doesn’t directly deal with tenants |
| Need to hire a Property Management Company? | Property owner does not need to | Property owner needs to |
| Person who is responsible for Repairs and Maintenance | Property owner | Tenant |
We have shown you everything you need to know about residential and commercial investment. But the final decision is up to you based on what suits you the most as well as your budget. If you decide to invest in any of these two types, or you need consultation from a professional real estate agent, contact RE/MAX Egypt by calling +202 2269 2004 or contact us here.
