Residential vs Commercial: The Real Numbers

In this episode of the TFS Wealth Cast, Vishi sits down with Nathan Ruvinski (Commercial Lending Specialist) to unpack the real-world differences between residential vs commercial property investing without the fluff.

They break down what actually drives outcomes for investors: cash flow vs capital growth narratives, typical rental yield ranges, lease length and stability, and why commercial deals can shift more of the ongoing costs (like rates, insurance, and maintenance) onto the tenant when structured correctly. Nathan also shares a client story that captures the mindset shift from “feeding the property” to owning an asset designed to generate stronger income over time, while still acknowledging the vacancy and economic-cycle risks that come with commercial property.

General information only: This episode is general in nature and doesn’t take into account your objectives, financial situation or needs. Consider whether it’s appropriate for you and seek personal advice if required.

Any information discussed or provided in this podcast is general advice and has been provided without taking account of your objectives, financial situation or needs, you should consider the appropriateness of this advice before acting on it. If this general advice relates to acquiring a financial product, you should obtain a Product Disclosure Statement before deciding to acquire the product.

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Transcript

dream big plan smart
build wealth this is the TFS podcast where money talk gets real
and financial freedom is more than just a goal
without further ado let's dive in
hi guys and welcome to another episode of the TFS Wealth cast
and today we have a very interesting topic
we're talking about residential properties
versus commercial properties
for all you property investors
joining us today is one of our finance brokers
Nathan Ruvinski and he specialises in commercial loans
that's right I do
that's right I do
I'm happy to be here how you doing Vishi
hey not too bad Nathan
how you doing I'm doing good
I'm doing good let's get into it man
has anyone ever told you
the way you say how you doing reminds me of Joey from friends
have you watched friends uh no
no I haven't though
oh wow
he hasn't watched friends
well I have watched some of it
but um no no
I'm always more of a Seinfeld fan
hey hey
from today onwards we're only work friends man
if you haven't watched friends
ha ha ha alright
alright guys let's uh
let's dive straight into it right
so Nathan when it comes to property investing
everyone's always talking about residential properties
but you
you say that commercial property might actually beat residential
in some cases that's right
yup I gotta know man
what's the deal we
we gotta dive into this today okay
alright well look listen
I think most Aussies think that kind of property investing
it means like a house or a unit
you know something safe kind of familiar
everyone's doing it right
but the thing is safe doesn't always make you money
commercial property that's a different animal higher yields
longer leases you know
tenants paying their own bills
I think that's real cash flow while you sleep
so you're telling me that it's not just capital growth
but you get more bang for your buck yeah
yeah that's right
we're talking facts here not fairy tales alright
buckle up Vishi you we're gonna go in for this one alright
I mean it money talks man
so that's right alright
so let's jump straight into it
give me give me some contrast Nathan
you know residential versus commercial
what's the story here yeah
well as I said
you know residential it's kind of the default
you buy it rent it out
you tell yourself it's fine because property always goes up right
negative gearing it kind of becomes part of your life
I guess pay today reward maybe later
but you know who's paying all the bills in the meantime it's you right
so you're saying a lot of people are just feeding their properties
every month yeah
every month cash goes out and hope goes in
ha ha ha ha 
let's talk about rental yield
since that's what most investors are interested in right
so hit me with the numbers Nathan alright
how much of a difference are we talking here
when it comes to residential property versus commercial property
residential in general yields around 3 to 5%
commercial is 6 to 12%
and that rent is actually hitting your bank account right
not just covering costs hold up
repeat that did you just say 6 to 12%
yeah yeah
and it's a difference is huge right
especially when you're looking at cash flow difference is huge
that's almost double yeah
what a residential property is gonna get you yeah yeah
that's why you know commercial it can be a lot more lucrative
okay okay alright
so let's talk about lease terms cause you know
usually residential properties uh
my my property
the minimum rental term was six months they wanted us to sign for
so yeah when it comes to commercial property what's the minimum
well look
to be honest from what we've seen in the market
generally with residential leases
you see them closer to 12 months on average six to 12 months
but with commercial you're looking a lot higher
we're talking three to 10 years or more um
generally around the 10 year, 5 to 10 year Mark um
that's income you know
looking forward
that you can actually plan your financial future around yeah
you find a tenant and sign them up for three years
and then you don't have to worry about finding a new tenant
for three years wow yeah
yeah and in most cases
these tenants will most likely extend as well right after three years
yeah that usually does happen
especially if the business is doing well
they're gonna wanna extend that as long as they can
damn so that that's that so to put that into perspective
that's some predictability you can't get with residential yeah
probably exactly exactly
and the based off that
you can kind of plan to expand and grow your portfolio as well
what about tenant responsibilities
when it comes to commercial property
because we all know in in residential properties uh
most of the time the landlord is responsible for upkeep and you know
whatever damages that need repair
what what is it the same in a commercial property
so look generally what you find in commercial properties
the rates insurance maintenance is actually often on the tenant
and that's net of the leases right
with residential you usually paying it all
so that's why your commercial net cash flow is stronger in general
sounds like the so wait I mean
so the property is basically feeding the owner
instead of the other way around
where it's actually like residential properties
most of the time it's sucking money out of you
exactly exactly and look
that's the magic of a good commercial lease if you set it up correctly
um it's gonna be it's gonna be feeding you quite well
okay so now
now that we've
the way we've spoken about commercial property investing
I feel like we've painted a fairy tale to our listeners
so Nathan give me an example man
cause you've got so many clients we deal with
when it comes to commercial yup
when it comes to commercial properties and commercial loans right
yeah yeah bro
so give us an example paint a picture
give us a real life example alright
uh look
I had this client uh
he's a good guy hard working
did everything right it doesn't matter if he's a good guy or bad guy
we just found the story man hahaha
listen listen
I'm getting there I'm getting there
let me let me
let me tell you the story alright
I got time I got time alright
I'm talking
he bought a he bought a residential investment
then he bought another one and they're both negatively geared
um then we kind of talked on the phone
you know every month
it was essentially the same conversation
you know he said mate
it's fine you know
property always goes up but here's the thing
every month the bank got paid first
then the tenant then the agent
then the council then the insurance company
and at the end of it all ha ha ha ha ha ha
my guy was left holding the Bill
he just kept telling himself this story about capital growth
10 years from now
fast forward a couple of rate rises and suddenly the vibe changes
right he's stressed
he's checking his offset like it owes him money
he's not investing anymore
the guy is just surviving at this point
and then almost by accident
he went off he bought a small commercial property
listen it was nothing sexy
no marble bench tops
just a tenant running a business paying rent like clockwork though
and uh
I think something wild started to happen
you know the tenant pays the rates
the insurance the maintenance
uh the rent goes up every year
and all of a sudden uh
for the first time in his investing life
the property isn't asking him for money right
it's sending him money so he actually calls me one day and he says
listen Nathan
this this
this feels illegal I said it wasn't illegal
it's just it's a commercial property man
man when I
when I ask you to tell us a real life example
you give us a real life fairy tale
wow okay seriously
yeah yeah
you know that
that that stuff does happen
especially in the commercial space
um a lot of clients do end up in situations where
you know they've been burnt in the residential investment space and um
when it comes to commercial property
they can start to uh
make back some of that money they've lost
so to speak man
that hits hard so commercial property
investing in commercial property
literally flip the whole vibe for your client
yeah yeah
yeah from
from from struggling to thriving yeah
yeah and it's not magic either
you know it's just the structure of commercial leases
you know otherwise yeah
I like that yeah
from from struggling to thriving
it's not magic it's the structure of commercial leases yeah
maybe that should be a topic
maybe that should be the topic for this 
this episode yeah
you can change the that's pretty cool
yeah there we go
we got the we got the title of the podcast right there
yeah alright
Nathan enough fairy tales
let's let's get to the facts okay right
yeah so
do people invest in commercial property for capital growth
or for rental income
well look
residential it grows on hope
population scarcity market sentiment
uh commercial grows on income leases
tenants rent increases
it's kind of different engines
one is kind of more emotional
one is mathematical right
okay got it
so commercial is like the reliable engine
residential is like the dream engine
is that what you're trying to say
yeah exactly exactly
um it's good to actually have a
you know a bit of both there
you can't really have one without the other in a successful portfolio
yeah cause I mean
in terms of engines then
commercial is more like a Toyota engine
and then residential is like a BMW
like a luxury German engine
yeah yeah
you can look you can look at it like that
you know maybe from a car perspective sure
yeah do you like cars Nathan
listen I'm not a car guy
but I know you are so it's a much exactly exactly
I'm sure it's a an apt comparison that makes sense
alright so we
we I mean we
when it comes to investing right
there's always risk involved
hmm so coming back to commercial property
let's talk risk and vacancy
because we know residential property
there are enough and more people looking to rent properties
but when it comes to commercial property yeah
what's the rental market looking like
what's the demand looking like
is there demand so look
we realistically
there is obviously a vacancy risk right
uh commercial properties can sit empty for months
if the tenant does leave um
also obviously
you know external factors
economic cycles maybe things like Covid
uh if that ever happens again
god forbid god forbid
but you know
if I I can't do Covid again
yeah it took 4 years of my life
yeah exactly
listen but it hit business is hard
you know and uh
residential does fill faster
but the cash flow is weaker
okay makes sense
so basically what you're saying is uh
with commercial property you're taking a bigger risk
but the reward is bigger as well
that's right that's right
and you know
it is a trade off but if you want the
if you want to reap the rewards
you gotta take that risk
like my grandmama always said man
if you don't make dollars
it don't make sense I'm joking
my grandmother didn't say that 50 Cent said it
alright Nathan
let's let's talk about your forte
hmm
financing these commercial properties
hmm right
uh so when it comes to residential loans
we know the fundamentals that go into residential loans
but I'm pretty sure that commercial loans are a lot trickier
yes yes
so look you're looking into bigger deposits
uh generally stricter lending terms
you know residential is an easier product
you know lower deposits
simpler approvals
that's why a lot of beginners often kind of start with residential
but once you've started to build up that residential portfolio
it starts to become a lot more attractive
um you can even draw out equity to purchase into commercial properties
so it starts to become a
a lot more of a sensible decision to move on to the next level
which is the commercial properties
so basically
I was saying to anyone who's just getting into the commercial
real estate investment space
start easy and then scale slowly
yeah with the right advice
exactly exactly
and it's so important to get the right advice as well
that's why a lot of my clients come to me because they kind of
they have maybe multiple investment properties
but they need to know uh
you know if they can get uh
into the commercial market
what the next steps will be
um so I kind of advise them on that uh
and that way they can start to build up their commercial portfolio
yeah
well most of your clients come to you not just because of
because of the knowledge
but also because you're a pretty chill guy man
hahaha
oh listen
I I try
I try to be I try to be right hahaha
hey why you blushing bro hahaha
alright alright
so uh
so basically we're saying
you know
people need to have a bit of diversity in their property portfolios
you have to put some eggs in the residential basket and you also
if you've got enough eggs lying around
put some in the commercial basket as well
so have some diversity invest in some residential property
invest in some commercial property
exactly exactly
look at residential it gives you the demands uh
stability that you might need
uh with commercial it gives you
you know the income and structure
so together they kind of build more of a strong balance portfolio
where one sort of works off the other
with the commercial being the real money maker for you
if you do it right
so end of the day it all comes down to the right strategy
that's right that's right
it's very important with commercial properties as well
alright Nathan
so before we close what's the bottom line
well look
I think a good way to look at it alright
let's let's let's do it like this
if if I was to tell you when it comes to residential property
and commercial property yeah
take the human anatomy mm right
which organ would be residential property
and which organs would be commercial property
okay um
maybe residential I
I I think the residential would be the heart right
it's it's kind of is vital and you know
people love it they adore it uh
commercial properties more like the head and the muscle right
so you kind of need to use both wisely
um cause cash flow does beat hope every time right
so when it comes to commercial properties
it is gonna be more important uh
to generate wealth long term
so it's definitely more of the head and muscle
I'd say
beautiful man this
this uh
this episode has been it's been quite intriguing actually
uh I would like to dive deeper
to commercial real estate in a later episode but
this episode
so what would be the key takeaways for the listeners from this episode
Nathan if you could sum it up
yeah so look
I think key takeaways are this
once you've you know
dabbled in the residential property investing space
maybe one or two investment properties um
or even before that
but ideally you wanna start to build up somewhat of a balance um
you know you have the residential properties that easy to get into
and they'll always be there
but if you wanna start making real money
you need to move into the commercial space
and that's where you can kind
of give me a call and I should be able to help you out
there you go guys
so if you're thinking about investing in a commercial property
you need the right financial advice and the right strategies
you need TFS you need Nathan
that's right yeah
so you know where to find him
just call our TFS hotline and ask for the guy with the deep accent
yeah if you can't remember his name that yeah
that's me awesome
hey uh listen Nathan
thanks for uh joining me on this episode guys
you'll see more of Nathan in later episodes
so with that being said
thank you for tuning into today's episode of the TFS broadcast
and we'll see you guys on the next episode
thanks guys take care adios
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