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G'day mate,
Sounds like you've made a great start with your investment portfolio. I have also been researching commercial property investing. As a general rule the differences to residential property is that the tenant pays the water and council rates. Also, banks will require a minimum 30% deposit on a commercial loan. You should look towards a cash on cash return of at least 10%. You can calculate the cash on cash return by the following"
annual rental income – annual loan repayments = annual net cash flow
Then divide this figure by the initial cash needed to purchase the property (deposit, loan establishment fee etc) x 100
I am looking for a property that has an existing and well established tenant that has a long-term lease in place. Also, ensure that the lease is indexed to the CPI.
Hope this helps!
Andyfev
Hi Darren,
It is always difficult to predict which way interest rates will move but generally speaking I think we can safely predict them to rise in the next 6-12 months. How high they go will be anyones guess. Speaking from limited experience (3 years home ownership) we never really gave enough consideration to not having a 20% deposit to avoid mortgage insurance (which was over $7,500!). The smaller deposit also results in higher interest payments meaning less money coming off the principal and more going to interest payments. We are now looking to invest in dwellings in regional NSW that we can rent out but won't touch it if we cannot stump up the initial 20% deposit.
Personally I think the pricerange you are buying into is currently inflated due to the 1st home buyers grant. I think prices will correct when this scales back. Hard decision to make but remember that you are buying into a market – things (prices and interest rates) go up and things also go down!!
Hope this helps.
Andyfev
