A beginner's guide to commercial property

[redwing]

enjoy...and hopefully comment

COMMERCIAL property investment is not just about investors with deep pockets and buying tall buildings.
Ordinary Australians can own a slice of commercial real estate for only a few thousand dollars, but like all investments they need to do their homework.

There are more things to consider than with residential property investment. Do you go for a tiny piece of a shopping centre by buying shares in Westfield Group? Do you pool your resources with friends or strangers through a property syndicate? Or do you go it alone, either inside or outside of your super fund?

CB Richard Ellis director Philip Rundle says there are four key financial questions every investor should ask before taking the plunge.

Firstly, is the lease secure? "Always read the lease and ask questions where there is any uncertainty," Rundle says.

Secondly, what will the stamp duty cost you?

"Stamp duty can often be a big amount and get forgotten in the purchase calculations," he says.

Thirdly, is the rent net or gross?

"It is important to know what the property's outgoings are and, more particularly, who pays for them," Rundle says.

The final question is: Does the yield reflect the quality of the improvements to the property, the terms of the lease and the strength of the tenant?

continues

 

[AXXO]

A property syndicate would be a great way to start in commercial property if you can find a handful of co-investors you can really trust all investing a similar amounts.

Is there anything good in the Perth metro area that can be developed by way of a syndicate? I'd like to check it out.

 

[Kent Cliffe]

It all comes back to the same thing. Due Diligence.

No matter what the asset is, if you put your money there without checking anything out, you are playing a game of roulette.

Treat the syndicate like you are buying that property. Most operators are genuine and trying to work in your best interest, but it doesn't hurt to do some digging yourself.

Also, a lot of unlisted organised funds require investors to be sophisticated and have a reasonable size contribution around $200k and up. This can be cash out from a property, but not leveraged as this is done inside the fund. This makes the fund idea often a little less achievable to the average person. Retail funds are more flexible with investor requirements, but these cost a lot more to set-up for compliance. As a consequence, more of the profits are taken up in fees.

AXXO - It is very rare to find a develop and hold syndicate. Passive investors are turned off as there is no steady income stream and development investors are turned off because there is no quick exit. Most of the unlisted funds that come over my desk are one or the other.

 

[Aaron Sice]

wow! i have a few thousand dollars. maybe i, too, can own a slice of commercial property!

imagine the possibilities with only a few thousand dollars down ....