Hi all. I’ve just signed up. My name is Mark. I’m thinking about buying my first home in the next 12 months. I was wondering if anyone has advice on whether a combined residential and commercial property is a sound investment. I would need my parents help because the kinds of properties I’ve seen for example are Sydney city terraces with 2-4 bedroom upstairs residential with a restaurant or shop downstairs. Entry price is $1m from what I can tell (about three times more than I could spend on just an apartment doing it by myself). Assuming my parents take on the $700k and I take the 300k, and the commercial property is leased to a tenant, I just need some guidance and would appreciate and all comments.
Thanks
MarkHi Mark,
Remember that commercial properties have higher vacancies than residential properties. If your portfolio consists of a single commercial property, then your are exposed if that property is vacant for a considerable amount of time. Your will lose your entire rental income there will still be a $700k loan to pay. I think it would be better to invest in a couple of smaller properties than 1 big one if you are starting out.
Maybe you could consider getting a 1-2 bedroom apartment for say 400k to start with and taking advantage of the First Home Buyers stamp duty exemption. I am not sure if this will be available on a mixed commercial/residential property and so you may be up for a lot of stamp duty costs with the mixed use option. Also see if your parents could put some money towards the apartment as a short term loan to save LMI.
You could then over a few years aquire a few smaller commercial properties to get up to the $1m portfolio you are after. Remember that 3 x $330k properties are better than 1 x $1m property.
Luke.
Hi Luke
Thanks for your reply. I hadn't considered First home buyers SD exemption but will look into that.A few years ago I took a lease on a commercial building to run my small business. The building was not currently lease when I took it over and had been empty for some months prior. In addition it took a while to negotiate mtually acceptable terms of the lease before I signed.
I guess I'm just agreeing with luke and saying be careful with vacancy rates for commercial properties.
thommo
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