Forums / Property Investing / General Property / Commercial or Residential?

Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of David ParringtonDavid Parrington
    Participant
    @davidparrington
    Join Date: 2017
    Post Count: 13

    Hi guys,
    should I buy as much residential property (positive cash flow) as I can, max out then look into commercial property investing or skip residential and go for commercial? My plan is to invest in commercial property but I am wondering if I should start in residential first or not.

    The strategy is to replace my current job for passive income from property in a 10 year time frame.I am currently paying off a 400k mortgage.

    Also having a credit card that hasn’t and doesn’t get used play a roll in my borrowing power?

    Any advice would much appreciated, thanks.

    Cheers
    David Parrington

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Unless you have significant cash funds – start in residential and build your portfolio up there until your borrowing capacity is exhausted. From there you can expand into commercial which allows you to access alternative borrowing capacity calculations/products which will allow you to get yourself to the next level.

    The general gist is to build your equity base in resi, then diversify into commercial whose deposits are leveraged from the residential IP’s.

    If you’ve otherwise got a mil in cash and ready to invest – you might just want to jump straight into commercial.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of fxdaemonfxdaemon
    Participant
    @fxdaemon
    Join Date: 2013
    Post Count: 113

    Unless you have significant cash funds – start in residential and build your portfolio up there until your borrowing capacity is exhausted. From there you can expand into commercial which allows you to access alternative borrowing capacity calculations/products which will allow you to get yourself to the next level.
    The general gist is to build your equity base in resi, then diversify into commercial whose deposits are leveraged from the residential IP’s.
    If you’ve otherwise got a mil in cash and ready to invest – you might just want to jump straight into commercial.

    Hi Corey,

    Is it much more difficult to grow equity in or release equity from commercial or both?

    I am very new to commercial, ie started tracking the market actively for 2+ years only but did
    notice many deals have been transacted at very low yield and/or strong growth compared to the last
    transacted price for the same properties.

    Thanks,
    FXD

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Unless you have significant cash funds – start in residential and build your portfolio up there until your borrowing capacity is exhausted. From there you can expand into commercial which allows you to access alternative borrowing capacity calculations/products which will allow you to get yourself to the next level.
    The general gist is to build your equity base in resi, then diversify into commercial whose deposits are leveraged from the residential IP’s.
    If you’ve otherwise got a mil in cash and ready to invest – you might just want to jump straight into commercial.

    Hi Corey,
    Is it much more difficult to grow equity in or release equity from commercial or both?
    I am very new to commercial, ie started tracking the market actively for 2+ years only but did
    notice many deals have been transacted at very low yield and/or strong growth compared to the last
    transacted price for the same properties.
    Thanks,
    FXD

    I’d say it’s more the size of commercial property prices which is the issue. As per the previous post I wrote that it comes down to how much cash you have from day 1.

    Many investors say that you generally don’t want to be going too much below $1mil for a reasonable commercial property otherwise you risk quality reduction in tenant/property – which at this level is needing 250-350k in deposit upfront which can be prohibitive for a lot of investors.

    So in comparison an investor can work each year with their cash to building up a portfolio in residential lending – so the coupled growth and saving will get their portfolio and equity position up so they can leapfrog into commercial thereafter.

    If you’ve otherwise got 500k from day 1 – it is a lot more viable to start getting into commercial.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Ethan TimorEthan Timor
    Participant
    @ethantimor
    Join Date: 2016
    Post Count: 282

    Also having a credit card that hasn’t and doesn’t get used play a roll in my borrowing power?

    Lenders will assess your borrowing power while looking at your credit card limit, not the actual amount used. It makes sense as you can max it out the day after the assessment is done.

    Good luck on your journey. Solid advices above from Corey 👍😎

    Ethan Timor | Aligned Finance Pty Ltd
    http://www.alignedfinance.com.au/
    Email Me | Phone Me

    Active Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)

    Profile photo of MaineMaine
    Participant
    @mainecollinz
    Join Date: 2017
    Post Count: 6

    My initial investment in real estate was residential. There are more individuals looking for residential property as oppose to commercial property.

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