Hi just wondering what sort of rental yields people are getting? I’ve been crunching the numbers in my area on properties up to $200,000 mostly 3 bedroom houses and I’m getting 5.5% – 7.5% at best. I’ve also had my eye on a commercial building going for around $250k with two shop fronts yielding around 10% with firm tenants. Interested to hear any opinions on this cheers
Hi Hoss
The commercial property will require a much higher deposit, since the lenders won’t lend as much against commercial buildings as residential, and commercial interest rates are higher.
Focus on the net rental yield (after costs and mortgage interest are taken out) as opposed to gross rental yield. It might turn out that the lost opportunity cost of having to sink a large deposit into the commercial building negates what otherwise appeared like a good idea.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Commercial generally has significantly higher yields than resi, but that’s just due to the higher purchasing constraints meaning the prices aren’t as diluted.
If you had pure cash to place on purchasing property then yes- you might well just go for commercial to maximise your return potential. But realistically most people grow their portfolio incrementally and have minimal deposits/need significant CG to keep the wheels turning.
I generally find that most commercial investors start out with residential and then transition to commercial when their portfolio gives them a springboard to get into the new market – not too many go directly into commercial from day 1.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Nicely said Corey. That’s the part that is normally withheld from the “commercial property is a better gravy train” story. The fact that this would realistically only be true on a cash buy.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
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