Investing in commercial property is the new black.

April 18, 2016
Chantelle Rangel

While major banks are tightening loans for residential property investors, another door opens with the opportunity to invest in Commercial property. With higher rental yeilds...why didn't you consider this before?

 
What is it:
Investing in retail, commercial or industrial property - things like billboards, pubs, restauraunts, child care centres etc.
 
Pros:
  • Higher yeild than residential - usually 7 or 8% for office or greater than 10% for Industrial
  • Lease terms can be longer
  • Expect to make more from income than capital gains because of the higher yeild and maintenence cost being beared by lesee
  • Look at it like long term security in your super fund

Cons:

  • Vacancy periods may be longer  - Biggest risk is losing a tenant
  • GST applies to commercial property - purchase price, rent and expenses
  • may be more expensive than residential 
Things to think about:
1. Control your expenses by using fixed interest loans
2. Control the risk of significant maintenance issues by ensuring a comprehensive inspection prior to purchase
3. The tenant is obviously a crucial part of your property investment. In commercial property, a government or large corporate tenant is considered a ‘blue chip’ tenant
4. Costs can be minimised by purchasing smaller strata title premises
 
Next steps - Call us and we will help you out with what to do next also (speak to your accountant, financial advisor, laywer and start looking for properties)
 
Or email chantelle.rangel@mortgagechoice.com.au
Posted in: Business lending

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