I’m looking to buy a positive cashflow property within the next 3-6 months. From the limited investigating I’ve done to date, it seems there are more deals to be found in commercial property rather than residential. I’d be interested in people’s views as to whether there are advantages or disadvantages in buying commercial over residential property, particularly for a first time investor wanting to get in at the lower end of the market ? or whether the fact it is a positive cashflow property is the most important thing (given that is my preferred investment strategy). And what are the most important things are to look out for with commercial property investments ? Cheers.
Hi clea
This reply is just my opinion.
Now with regards to your questions.Firstly commercial v residential,read some of Dazzling’s replies he is big towards commercial,I think mainly because of whinging tenants and also for better returns.
Now for the first time investor,you don’t need any bad experiences so take small bites and keep in your comfort zone.
What to look for with commercial properties-A long term tenant on good terms would be great.
Having no tenant,you may get the property cheaper,but there’s no cashflow and no guarantee to get one,so you will have to make it work one way or another.
I come from a country town where i see a lot of empty shops,sheds and yards.
Just do your due diligence.
Hope this helps,regards BillHey Clea,
I procrastinated for way too long before I purchased my 1st IP. The main focus for me was +cf and I looked at both commercial & residential. They both had pros and cons. I ended up with a commercial motel apartment which the company leases back from me. It has the best of both worlds! I don’t have to worry about tenants, the operator has the same vested interest in looking after the property as I do, I have a contract in place(21 years) with guaranteed rent and increases, I pay NO rates, body corp, etc. It’s a very easy buy and forget property. The rent goes straight off our mortgage, I then pay the interest at the end of each month and keep the $ 200 difference.
Since the wife and I bought it it’s been hassle free. We are now going to sell it to raise some capital to start a new business (which will kick off in Feb 06). But, I wouldn’t hesitate to buy a similar property down the track when our business gets established.
It’s done us very nicely, but now it’s time to move on. As I say, it suits us – you need to do your own research and situational assesment to find the property that’s right for you.
Cheers
Russell 0414 498 152
[email protected]Definitely the residential stock if just starting out.
The biggest thing to concentrate on IMO is securing good capital gain to increase your equity ASAP.
You really need to be looking at something bog standard, that will rent easily, to give you only a few hassles so that you can get on your feet – so to speak.
The two biggest advantages of starting with RIP’s are ;
1. The bank will lend you a tad more and therefore you can get into a slightly better area….leading towards that CG increase.
2. Given your domestic upbringing, you’ll probably be more aware of what is going on with RIP’s.
3. The equity thing in point 1. snowballs as you can lend say 90 or 95% to start off with and then 80% LVR avoiding LMI later on.You probably can’t afford to purchase something decent to attract good CIP tenants, and you probably can’t afford to have bad CIP tenants.
Early in your IP history, I’d be going for CG and sacrifice the cashflow side of things. Work on that side later on down the track when your increased equity allows you to purchase some of the good stuff CF wise.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Thanks for your tips – appreciate the advice. Cheers.
Agree with Dazzling..
Totally suprised yor not backing up Commercial, although you are right, not when starting out..
Roy H.
L.R.E.A., Dip FS (FP)
Guardian Property Specialists (GPS)
http://www.gpsnetwork.com.auhi clea
I have both.
comm gives return and lower growth and resi gives growth and lower return.
I don’t have enough info to give you an informed view but there are acouple of brokers here who will look at your lending requirements and give you a few Ideas.
If no brokers replys send roy an email and he will get a broker to email you from his network.(not me)
I must admit I do like commercial for ease.
mine are on a 5 x 5 cpi increase.here to help
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