Commercial Property

[Snowgum]

Hi All

I was wondering if anyone could give their impression on commercial and residential property ie does commercial property 'follow' residential in its cycles or does commercial move up and down irrespective of what the residential market is doing. If commercial does follow residential, does it mean it is not a good time to buy into the commercial market? Or just set a benchmark for yourself ie only buy something that is going to generate >8% net pa?

 

[geoffw]

There are generally different cycles for residential, office, retain and industrial, so you need to do your research well. Of course, there's regional variations as well. Don't just hop onto one because residential is slowing.

A lower entry cost to commercial is available through property trusts- have a look at some of Peter Spann's recent posts on the subject.

 

[quoll]

G'day Snowgum

I became interested in Commercial Property a couple of years ago and have been watching and waiting. The return in the past seems to have been better than it is currently. Many investors I have spoken with won't touch commercial unless they get >15% return. The average seems to be about 10% currently.

Work out what kind of property you are after, Retail, Warehouse, Office, Medical, Sheds, etc. The subsets are all different and the average yields are different for each.

Speaking with my accountant a while ago he was suprised this time because the commercial market moved at the same time the residential one did. In the past they have been different.

Have fun talking to commercial investors, you should find something that tickles your fancy.

Cheers
Quoll

 

[Cosmo]

I have residential IP’s but my brother has a mix. He’s always bragging how fantastic the returns are for commercial until he had a 6-month vacancy!!

The new tenants were definitely in control and with a reduced rent they asked for and got a $50k fitout for free. Because the rent is lower now the potential value of the premises is less……double wammy!

Definitely 15% plus returns before I’d venture into commercial.

 

[RightValue]

There is an excellent article on investing in commercial property and the pitfalls of doing it with the success of residential property investment as the expectation of success, comming out in the Australian Investors Association quarterly magazine, Investors Voice on this topic; www.investors.asn.au for those who subscribe.

I am not advocating joing this assn, its'just that I know the guy that wrote the article.

cheers,
RightValue

 

[geoffw]

There is a book available- "How Investing in Commercial Property Really Works" by Roth & Lang- though you may have trouble finding it. Try your library or ebay if you can't find it.

How Investing in Commercial Property Really Works Martin Roth and Chris Lang

0 701638 08 7 RRP: $29.95

Studies have also shown that commercial property investments often perform well when other asset classes are weak. Well, the stock market is at a four year low, there are fears that residential property prices may have peaked, and with a range of new investment opportunities, the spotlight has moved onto the numerous benefits of commercial property. These attractions include high yields – generally far higher than for residential property or the stock market, security of income, tax benefits and the chance of capital gain.
Best-selling finance journalist and author of Top Stocks 2003, Martin Roth has exhaustively researched this area of investment and his findings are written up in this comprehensive new book.

from http://www.wrightbooks.com.au/realesta.htm

 

[Snowgum]

Thank you all for your responses. I have just finished reading 'How Investing in Commercial Property Really Works' and found it really informative. Although I have read numerous books on residential property, I am not very confident about investing in commercial.

Has anyone ever used the services of a property consultant? I am thinking that this may be the way to go until I do become more knowledgeable in this area.

 

[keithj]

Has anyone ever used the services of a property consultant? I am thinking that this may be the way to go until I do become more knowledgeable in this area.

Try http://propertysearch.com.au for Bris commercial or development property.

KJ

 

[MJK]

Snowgum,

I used a BA to assess and negotiate a commercial property I found. I needed an experienced person to bounce the deal off. I needed to know that the rent was the correct market amount, that the property would be relettable, that there wasn't an oversupply in that area, that the lease would be renewed as part of the sale contract terms. There is so much to think about.My BA negotiated 15K of the price for me at a cost of 5K. I wouldn't have had the confidence to go it alone for the first time. I learned alot from my BA, mortgage broker and this forum.

My commercial experience has been a great learning curve but you've got to be ready for it. I think you need to look at worst case scenarios as Cosmo mentioned and see if you can handle them.

MJK

 

[Snowgum]

Firstly I want to thank you all for giving me some great ideas. Sounds like obtaining the services of a consultant is a big plus for the inexperienced (read 'not confident'). Would anyone be able to recommend a property consultant in the Canberra region?

 

[Aceyducey]

Snowgum,

I did a report in the forum on one guy about a year ago.

Can't remember his name now, but I'm sure that if you searched the forun you'd find him.

Cheers,

Aceyducey