Many new entrants to the market, however, are reluctant to take this step because they subscribe to some common fears about investing in this type of property.
"People often think that trade is a very expensive thing in which you need a lot of money to get in, but the reality is that you can find property in a capital for $ 350,000 – sometimes even less, "says Rethink Investing director Scott O & # 39; Neill.
"The entries don't need to be high and once people get past that, they start to seriously consider and look at commercial property for its fundamentals, which is that the flow Cash is much better than any residential can give you. "
O’Neill points out that commercial investors can often get more for their money than residential investors.
"A 7% net return on a commercial property of $ 300,000 to $ 400,000 can give you $ 400 per week in positively oriented cash flow. In residential investment, the best you can expect would be a uniform and slightly positive gear property with maybe $ 50 a week in your pocket. But then you go into poorer quality stocks. "
The key to effective financing of commercial property is to talk to the right people – not to residential property experts, but to those who have experience in managing commercial property.
"Find a Commercial Mortgage Broker – There are a lot of residential mortgage brokers who have never taken out commercial loans, or maybe they only make one out of all three month. They probably won't let you find the best deal of the day, "warns O’Neill.
"Most loans are in the range of 70% to 80% – yes, 80% are now coming to the market more than before. Maybe [lenders] is looking for more market share in this space, so this is a positive sign for the market. I see interest rates as low as 3%, and I think that in 2020, we might even see a rate below 3% for a larger loan. "
To maximize your investment, you can add value to a commercial building by subdividing it to increase equity.
"You may be able to buy multiple office space and then divide it up to sell it individually. As you sell at a lower price, these investors have less choice, so they tend to pay more for the same rental value, so you can make equity just by making the property smaller, "explains O'Neill.
While one of the best-known benefits of commercial real estate is cash flow, O’Neill warns investors not to forget the potential for growth.
"To be sustainable, you want good cash flow but you need growth. Even a commercial property that I would recommend still needs a lot of growing nature – you are not going to go to a very very regional area to look for a 10% yield because although the yield is 10 out of 10, there will be zero growth, "he says.
"Sustainability is always about treating your real estate portfolio like a business – looking to make that much money over a five-year period because you always want to invest for the long term."
Sarah Megginson, editor of Investment Property magazine, interviews Scott O'Neill for the YIP Talk podcast, where he shares more myths and misconceptions about LVR, finance, vacancy rates and capital growth for commercial properties; listen here.
Main suburbs:
bendigo
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Nundah
,
south cardiff
,
The Pelvis
,
rockville
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