Commercial property is apparently a good investment. Are you interested in a let-to-buy property or redevelopment projects? Also your budget is very important to determine which type of property you’d better to choose. If your savings are under 1M look at buy-to-let residential properties, flats for students or apartments near hospitals or business centers, they will enjoy high demand. From 1 to 5M can buy retirement homes (great opportunities in Europe because of general ageing of population), retail premises or office buildings. And if you are a happy owner of more than 5M consider variants of large hotels, shopping centers or construction projects (yields can achieve 50% but risks higher)
Commercial property can provide for much higher rental returns. A strong economy is fundamental for any thriving commercial property investment. While commercial property looks compelling on paper, there are possible risks you need to be aware of before investing. Acquire complete knowledge about profitable property investment and learn property business leadership packages.
Another pro/con (its on both sides of the coin) – is that the finance is different to normal residential lending. In terms of deposit requirements, costs and the like it can be more onerous and restrictive, but by the same virtue being a commercial loan means the way borrowing capacity, income verification etc is treated differently which can potentially free up significant borrowing capacity to keep buying property when your capacity may have been exhausted or ineligible with residential lending.
Some examples which I’ve done which would not have been possible under resi easily:
*Entrepreneur who flips businesses, significant cash but no ongoing income through a job or business – able to invest into over 4.5mil in commercial property without the lenders batting an eyelid
*$1mil cashout approved within 24 hours without any required documentation other than a completed valuation for a self employed client with 5 businesses – imagine the tomes of paperwork for a normal deal
*blend of 100% LVR of commercial + business lending for a business, allowing them to purchase a property to work from, then receive secured funding for fitout and cash flow management
Horses for courses – but I do think it’s a genuinely productive proposition to consider commercial property when nearing the end of your traditional borrowing capacity and wanting to extend that bit further.
Great input here all around. I would only add that it’s best to first decide whether you are primarily an income investor or a growth investor. Commercial is great for income, but not so great as a growth asset. That said, I can understand why you’re looking elsewhere than Aussie residential property for generic growth.
I have been investing in Commercial and Residential for past 10 years. I would clear steer off commercial. We are selling all our commercial properties. If I take in account capital growth and other expenses incurred on commercial property. I would rather stick to residential.
Cons of Commercial,
You need 30% in intial deposot
Real estate fees are twice than residential
you might get 2 – 3 % more yield than residentail. But the banks will charge you 3 – 4 % more interest on the loan, which defeats the purpose of getting it for yield
Bad capital growth
Banks and Real estate agents will make more money than you.
Might be worth looking at the interest rates in terms of commercial lending – this has come down heavily in recent times with commercial rates as low as the low 4’s right now for prime deals, up to the mid 5’s for the more out of the box scenarios. We’ve been knocking through a lot of a commercial product for 4.29% for deals which tick all the right boxes for the lender.