If you have a lot of residential properties, say 100+ wouldn’t it be wiser to trade up to say office buildings, retail complexes or large industrial buildings instead of keep buying residential.
My reasoning is I’d rather have 1 office building worth $10m returning $1m than 100 houses with the same financials.
What are your thoughts? G7september 11
lifexperience
yes, but putting all your eggs in one basket ???
your risks are then also concentrated……
Hi,
I think that most people’s natural progression from buying little houses, would be to buying commercial properties.
These can be picked up from under $200k, with the tenant paying all outgoings.
I wouldn’t feel comfortable going straight into large office buildings. Imagine if it sat vacant for any length of time.[confused2]
Just my thoughts,
Del
g7, ideally I agree. One building, one tenant (preferably government on a 25 year lease[biggrin]) would be awesome!
In an excellent location, you could probably do well – but a good building would probably cost more than $10m. With 100 houses you have a loooooot more paperwork etc. but less risk (unless they’re all in the same town, and there’s only 105 houses!) of something major happening to all of them at once.
If I had 100 houses, I would look at doing what Robert Allen has done in the past, and that is to hire one person (or persons) to manage the whole lot – and also to scout for other deals, of all kinds. I suppose I should have the financials to go for the bigger buildings too by then….
Cheers
Melcommercial often is distorted significantly on rental returns
(lots of smoke and mirrors here) be very careful, what you see is often not the reality- essential to purchase quality, at actual not ‘book’ rentals, with quality tenants on quality leases. be very confident in your solicitor.cheers
Brendan Heagney
Mortgage Broker
0438 436383If you don’t ask, the answer is no!!
Residential is a fantastic stepping stone to commercial, but I wouldn’t go selling off all my houses to buy one big commercial property. Best you move into commercial carefully and learn to walk before you run.
If you had a hundred houses you comfort level would already be greater with regard to price. Look at buying a smaller commercial property, learn the ropes, then buy some more.
Cheers
JeffHey
Just wondering if there is something wrong with me.
I have only just started on this investment journey…but I started with a commercial property. Its leased for 10 years at three times my morgage payments…..Is this called beginners luck and I shouldnt be in the commercial game till I have gained experience with residential?????[confused2]Good is the enemy of best!
Not at all Hot Property. I think you have done well with your commercial, and I’m assuming you did all your research before buying, so knew what you were looking at.
I think the warning for ‘residential’ investors is that commercial is quite different. If we have been investing in residential first, commercial’s a different ball game, so you can’t really jump in with your current knowledge and secure a great deal – but could in fact risk what you do have.
Cheers
MelGetting into commercial property first is fine HotProperty. It is just that the normal course through property is with residential because people understand it more easily and the entry level tends to be a lot lower.
If you are more comfortable with the risk involved with commercial property then it is highly recommended
Cheers
JeffThanks for the encouragement guys. I’ll let you know how I progress with my next venture.
Good is the enemy of best!
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