The basics of commercial property investment

August 1, 2018
Commercial property office space

Although most people find themselves happy to invest in residential property, there is often some hesitation when it comes to commercial property investment.

While there are additional factors to consider, commercial property investment is something that should not be written off so easily.

Small businessCommercial properties can vary in size from a small shopfront to an office skyscraper and can even include property such as carparks and warehouses.

It’s more likely that a private commercial property investor will be able to afford the smaller scale properties initially while larger commercial properties will be owned by large businesses. 

It’s important that you take the time to learn about the additional tax implications, insurance requirements and landlord responsibilities before deciding to go down the path of commercial property investment as any additional costs here may impact upon your ability to afford this type of property.

Speaking to a range of professionals such as commercial real estate agents, accountants and buyers agents may assist you in developing a better understanding of what will be involved with commercial property investment.

Commercial property investment benefits

While there are some additional intricacies to consider with commercial property investment, there are also the benefits to consider. Here are just a few.

Rental yield available is often higher as the rental price that can be charged is often more than that of a residential property

Commercial property office space Less tenant turnover – commercial leases are typically longer and often include an option for your tenant to extend the lease. This gives you a more guaranteed rental income and less periods of vacancy

 Less competition in the market – since most investors purchase residential property there are less commercial property investors to compete with for available property

 Income security – commercial tenants are businesses and it’s not often that businesses will want to move, meaning you can enjoy a higher level of income security when compared to a residential property

 Lower maintenance costs – Unlike residential tenants, commercial tenants are responsible for their property’s ongoing maintenance and fit out costs. This can lead to increased property value without the ongoing costs. Be sure to check the terms of your lease though regarding the fit out and whether you want it removed at the end of the lease or not.

Location, location, location

Your considerations when looking for an investment property need to be from the point of view of a business. Think about how businesses are performing in the area you’re considering, the types of companies that operate in the area, transport to the area (an important one for employees to get to the location) and the property’s flexibility to house different types of business.

Commercial property warehouseYou’ll also want to consider if it’s a high retail area, that is, the level of traffic that passes by foot or car. You’ll also want to be abreast of any major infrastructure changes coming to the area which may impact on your commercial property in either a positive or negative way.

Chat to local commercial real estate agents about the opportunities in the area, the types of rent that similar properties are achieving and the sorts of demand they are seeing for commercial property in general within their local area.

Researching real estate portals for similar information can also be a good place to start.

 

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