Hello all.
Brand new, enthusiastic and keen to get cracking.
Commercial property seems to be a good area to get into now to get the positive cashflow going.
Any ideas?????
Hi Rooinek
Commercial property yields can appear tempting, especially alongside the average residential yield at the moment.
However you need to be aware that investing in commercial property is a different proposition to investing in residential real estate.
For starters your tenant will be a business and if you are a small investor then most likely the business will be a small or new business as opposed to a government or large corporation. The chances of the business failing would be high and you could be left with a vacant property, often for long periods of time if the economic conditions are poor or your property is of limited appeal.
Banks will lend you less money for a commercial property so you will need to find a larger deposit from elsewhere.
There are also other factors such as GST payable on purchase of commercial property unless it is “a going concern”.
That said, some benefits are a higher yield (generally) and also that the tenants will often pay some or all of the outgoings.
Hope I haven’t put you off the idea completely but just alerted you to do more research and don’t be tempted by yields alone.Regards
SMTMHi Rooinek
I have invested in commercial and industrial for the last ten years and have done very well – huge ‘realised’ capital gains and great cashflow.
With regard to industrial the secret is to have the ‘right size’ and a good PM. I tend to favor 300-350 sq.m.
However I am finding suitable properties harder to find now as a lot more are becoming owner occupied – around this size.
All my tenants pay all the ‘outgoings’ including insurance.
Vacancy rates for the last four years are zero.
It can be done.
Mr Pickworth
You will never go broke taking a profit.
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