Apparently Investors “mature” from Residential (units, houses, condos, duplex, multi-family) to Commercial Investments (Retail strips, Industrial, Office spaces, Warehouses, Shopping malls, etc) as they get more actively involved within the property game.
I have diligently looked at Commercial Investments as I consider myself as ‘somewhat’ a maturing Player in the game right now.
So far the game has been in Residential only. With a dozen plus properties I have seen both Capital Gains and Cash-flows from the diverse portfolio we (missus & I) hold.
Have witnessed both the Booms and Busts, purchased across different states in Australia & managing them 1000s of miles away.
And I am still Buying whenever the Bank nods at our application.
Ours is a strong CF Positive game.
I have nearly replaced my salary income from Nett rents. And I still continue working at my day job. So it is Passive income.
I am not in the business of losing a $ and then asking the government to give me 40 cents back. I hope to earn a $ wherever I can and pay 40 cents to the government.
This is the first time I have seriously considered buying Commercial. And my summary of the pros and cons are as follows:
Commercial Residential
Cost of Funds 9% 7%
Returns 9 - 15% 6 - 10% plus
Occupancy Factor 44 weeks 48 weeks
(out of 52 weeks)
Liquidity Factor 3 7
(Ability to sell Quickly On a scale from 1 – 10, 1 being hard and 10 being easy)
Annual Bank reviews Yes No
(If not tenanted, bank can call in the Loan to be paid by the borrower)
Property Value Dependent on Tenant Dependent on the Property
LVR 60% maximum 90% maximum
Investment Type 2 6
(1 being Passive and 10 being highly active)
Please note that these figures are based on MY current conditions. I am not saying that any one else will not be able to get a Comm Loan for less than 9%. Or that one may view the Occupancy factor for Resi at 50 weeks rather than 48 weeks.
I am being rather conservative on Resi and this is MY situation of the options in front of me.
Looking at the figures above, I did a lot of soul searching and beg the question why am I still looking at Commercials? The risks outweigh the Returns. Also with the LVR restrictions, my money goes further in Resi.
What say? Look forward to your thoughts…
I have diligently looked at Commercial Investments as I consider myself as ‘somewhat’ a maturing Player in the game right now.
So far the game has been in Residential only. With a dozen plus properties I have seen both Capital Gains and Cash-flows from the diverse portfolio we (missus & I) hold.
Have witnessed both the Booms and Busts, purchased across different states in Australia & managing them 1000s of miles away.
And I am still Buying whenever the Bank nods at our application.
Ours is a strong CF Positive game.
I have nearly replaced my salary income from Nett rents. And I still continue working at my day job. So it is Passive income.
I am not in the business of losing a $ and then asking the government to give me 40 cents back. I hope to earn a $ wherever I can and pay 40 cents to the government.
This is the first time I have seriously considered buying Commercial. And my summary of the pros and cons are as follows:
Commercial Residential
Cost of Funds 9% 7%
Returns 9 - 15% 6 - 10% plus
Occupancy Factor 44 weeks 48 weeks
(out of 52 weeks)
Liquidity Factor 3 7
(Ability to sell Quickly On a scale from 1 – 10, 1 being hard and 10 being easy)
Annual Bank reviews Yes No
(If not tenanted, bank can call in the Loan to be paid by the borrower)
Property Value Dependent on Tenant Dependent on the Property
LVR 60% maximum 90% maximum
Investment Type 2 6
(1 being Passive and 10 being highly active)
Please note that these figures are based on MY current conditions. I am not saying that any one else will not be able to get a Comm Loan for less than 9%. Or that one may view the Occupancy factor for Resi at 50 weeks rather than 48 weeks.
I am being rather conservative on Resi and this is MY situation of the options in front of me.
Looking at the figures above, I did a lot of soul searching and beg the question why am I still looking at Commercials? The risks outweigh the Returns. Also with the LVR restrictions, my money goes further in Resi.
What say? Look forward to your thoughts…