1. Do commercial properties generally sell for less than residential properties?

It can be higher, lower or the same – it comes down to the specifics of the property, location, availability of commercial within the area.

2. Are loan rates, structure, ease of approval the same?

NO. Generally normal residential lenders will not want to touch any property which is specifically zoned commercial. There are some lenders which can potentially look at it as residential, but it’s the exception than the rule. Commercial loans generally take longer to be approved + settle, have higher interest rates and larger deposit requirements.

3. If I choose to convert it to a residential property at a later date, is this relatively straightforward? Or is it unlikely to be allowed? What are things that are considered in this instance?

Dependent on the councils specific development plan. Best course of action is to speak with the council who will be able to let you know how easy/difficult it will be. If it’s within a commercial specific area it makes it far more unlikely to be altered other than remaining on a residential permitted use with a commercial title.

4. Is this purchase a terrible idea?

Depends! If you like the property and there’s potential to get it for a below market price due to the underlying ‘issues’ which will limit the buyer pool, it may very well be a good deal. Just go in with your eyes open with the purchase and ensure you price in the commercial zoning issue comparative to other residential property in the area.

Nathan Houareau wrote:

If you pay cash for a car space will it be cashflow positive assuming a vacancy rate of below 5% and market rent achieved?

If it wasn’t – why would you buy it? ;) No point owning an asset for cash which loses you money, that is a literal money pit.

Let us know how you go. Will be interesting to see what your plan is from here – are you thinking of still sitting on the sidelines to see if the market pulls back?

What’s the plan/what do you think will drive you to make a purchase if it just flat lines/rises without a significant decline?

Changing it to any other form of joint structure will result in the same serviceability issues – which is exactly why most investment savvy brokers advise HEAVILY against it. This just leaves everyone in a situation where no one can really progress further due to the drag from joint ownership.

Transferring to other entities/ownership will be a CGT/stamp duty trigger – it will be costly so you would need good reason to do this.

As jess mentioned, the overall development should increase in value than it’s previous amount, so you shouldn’t have any issues. What this means if most division its just a case of untying the securities so they’re not cross collateralised and adjusting the LVR on each so it balances out.

If your value decreases overall from developing, you’re doing an unprofitable development and losing money, so avoid!

I’d shy away from student accomodation. Investing in property is about: Generating a growing asset base and rental income. Student accomodation gives you a specialised security which has negligible if any capital growth – which is what gives it that perception of strong yields. In reality its just the case that the value of the property has lost value in real terms. When you could this with the fact that every year of inflation means your return is dwindling, that ‘high’ yield isn’t all that great.

They also in general will require larger deposits and a large number of lenders won’t touch them at all.

There’s millions of properties in Australia – so there’s no need to sacrifice in some parts of your investment. Stick to A-grade property which ticks all the boxes to get the best long term outcomes for your needs.

In terms of the rest of the thread- when starting out I think it’s best to start with your goal and work you way backwards. This helps give you a strong framework of what you actually need in an investment, what yields you can accept, what growth etc. I’ve previously written a bit about this here: http://www.precisionfunding.com.au/planning-your-investment-strategy/

Hi David,

You’ll find limited info on this here – it’s mostly Aust based property investment talk here. In terms of lending, she will need to engage with a US based lender, Australian based banks will not lend on non Australian security (property). Most US banks aren’t too keen on non US citizens borrowing there for property either, so traditionally investors have either had to pay cash OR go to hard money lenders (private lenders) who charge 6%+ rates. I have heard of a few cases where some lenders are now considering it there, but haven’t seen any specific details which are reliable enough.

I’ll leave the tax questions to one of the taxperts.

Normal as it gets then – tilt up commercial construction is the norm in Australia these days.