Hi All,
I have another newbie question… why would most investor prefer to start at residential instead of commercial property ?
I know commercial property has lower LVR (hence higher deposit) compared to residential, but there are many benefit I can see in commercial property but not in residential, e.g.
– outgoings paid by tenant
– contracts are more stringent, hence may require less effort to have the investment running on auto-pilot
– may be able to find better deal by finding vacant possession and attract occupantIs most investor prefer to start at residential because there are more due dilligence to be done in commercial property ? Is it because of deposit ?
If I were to start with commercial property, what are the things to watch out for ? How much different is investing on commercial property and residential property ?
Any feedback and suggestions are appreciated – and thanks in advance for your feedback !
There are a couple of reasons. The first is that with commercial it can be difficult to rent the property out. Simply lowering the rent still might not get you any tennants, so you have to know what potentially you clients are looking for. Also you might have to spend alot more money to get the tennants and be more creative (for example you might have to put a barbed wire fence in).
With rentals you just have to drop the rent to find a tennant (or perhaps make it fully furnished). The point here is that it is relatvily easy to get a tennan, compared to commercial.
Another problem is the deposits. Usually you will have to come up with a 30% deposit, while with property you can get away with 5% (or 0% if you have equity!).
A book by Dolf De Roos called ‘Real Estate Riches’ explains the difference quite well.
Rgds.
Lucifer_auThe entry level for commercial property is higher than residential and therefore a greater deposit is required.
Most of the larger property investors make their money from commercial rather than residential. It is easier to look after fewer large properties and hence less tenants for better rentals.
Commercial tenants look after your property because it reflects on their business if they don’t.
Determine how much you can afford and what type of property you are interested in ie retail, industrial, office etc. Study up on commercial leases and get a feel for rent rates on a per square metre basis for both the type of property and the geographical area.
Always have an alternative plan for the building you buy if the tenant goes broke.
Remember their is a bargain in every market.
Cheers
JeffHi THere, you may find this book interesting “How investing in commerical property really works”.
Martin Roth and Chris Lang and they from OZNow that I manage to get internet access back, I can finally post some reply…
Marisa & Lucifer_au, thanks for recommending the book – I’ll go check it out.
ibuycashflow, thanks for the feedback – still looking for deals, hopefully sometime soon we can get started…
Hi
I am a new register to this site and had the very same question in mind as to what you have asked. I would welcome an email as to the responses that you have received from your question.thanks in advance
jason Harris
[email protected]Jason Harris
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