Sydney commercial property for beginners.
- Thread starter alpina
- Start date
Alpina,
I don't believe there are any good commercial books,
Best advice will come from your financiers re the funding.
The security of the lease is all important. You will need 3-6mth bank garantee or bond (Directors garantee's can be helpful but I would prefer cold hard cash.) Run everything buy a good commercial solicitor.
You need to have deep pockets for worst case scenario which would be an extended vacancy or a bankrupt tenant that hasn't moved out etc...
Risks of vacancy are higher in smaller investment < 1m imho.
Don't buy anything that is too single use. More generic is better IMHO.
Finding the property is the easy bit. Finding and keeping tenants is where the real fun begins. Residential is the opposite where the tenant is of much less importance as there will always be another in a couple of weeks etc...
MJK
I don't believe there are any good commercial books,
Best advice will come from your financiers re the funding.
The security of the lease is all important. You will need 3-6mth bank garantee or bond (Directors garantee's can be helpful but I would prefer cold hard cash.) Run everything buy a good commercial solicitor.
You need to have deep pockets for worst case scenario which would be an extended vacancy or a bankrupt tenant that hasn't moved out etc...
Risks of vacancy are higher in smaller investment < 1m imho.
Don't buy anything that is too single use. More generic is better IMHO.
Finding the property is the easy bit. Finding and keeping tenants is where the real fun begins. Residential is the opposite where the tenant is of much less importance as there will always be another in a couple of weeks etc...
MJK
Have you considered using a property securities fund or direct listed property trusts? This is commerical real estate but is alot more diversified and managed by professionals. If you bought a commercial property and it became vacant you could be up for alot of money. This lessons the company risk substantially.
LVR's are around 70-75% and interest rates around the same as commercial loans. Do a search there are some great posts and threads by keithj. They are also alot more liquid, it's easy to sell units as needed.
Further reading
www.asx.com.au
www.streettracks.com.au
www.vanguard.com.au
www.ubs.com.au
LVR's are around 70-75% and interest rates around the same as commercial loans. Do a search there are some great posts and threads by keithj. They are also alot more liquid, it's easy to sell units as needed.
Further reading
www.asx.com.au
www.streettracks.com.au
www.vanguard.com.au
www.ubs.com.au
How Investing in Commercial Property Really Works (2nd Edition) by Roth & Lang
It investigates different sorts of commercial property investing (including trusts) but doesn't go into great depth in any single are. But it's a start.
It investigates different sorts of commercial property investing (including trusts) but doesn't go into great depth in any single are. But it's a start.
There's a website which also seems to have some good info- you do have to sign up to get it. There is an email bulletin- and there are archives which go back quite a way.
http://www.gal.com.au/
(Gardner and Lang- it's the same Lang whose name is on the book I've mentioned).
http://www.gal.com.au/
(Gardner and Lang- it's the same Lang whose name is on the book I've mentioned).
Hi,
I work as a commercial broker (in Shanghai) so I spend everyday, all day helping people solve their commercial property problems
Firstly, you need to understand that yields in Australia are very tight at the moment. Large en bloc purchases are selling for as little as 6.25% and smaller strata titled developments are not much better.
To me, a commercial investment is really only appealing if you can add value in some way. From my point of view, you need to weigh up the hassle and extra costs of a direct investment versus just buying units in a trust. If having control is going to let you add value then it may be worth it. If it is just a passive investment, why not buy units in a trust?
As an example, I was looking at a small shopping center in Western Sydney early last year that had extra land that was not being utilised and could have been used to build a fast food shop. As a passive investment it was only yielding 7.5% but with a little development the yield could have been pushed up to maybe 11-12%.
Look at the 'property clocks' that Jones Lang LaSalle, CBRE, Colliers etc. produce. They will tell you where in the market cycle the different sectors of the market are. Also, there is lots of research available for free on the web at each of these companies' websites that will give you a very good understanding of the business drivers
Like in residential investing, you want to find a site that will give you options. In particular, most opportunities come from changing the use of the property.
Lastly, commercial property is very much about relationships and problem solving but it is not rocket science. With tenacity and dedication you will do well.
Cheers,
Ben
I work as a commercial broker (in Shanghai) so I spend everyday, all day helping people solve their commercial property problems
Firstly, you need to understand that yields in Australia are very tight at the moment. Large en bloc purchases are selling for as little as 6.25% and smaller strata titled developments are not much better.
To me, a commercial investment is really only appealing if you can add value in some way. From my point of view, you need to weigh up the hassle and extra costs of a direct investment versus just buying units in a trust. If having control is going to let you add value then it may be worth it. If it is just a passive investment, why not buy units in a trust?
As an example, I was looking at a small shopping center in Western Sydney early last year that had extra land that was not being utilised and could have been used to build a fast food shop. As a passive investment it was only yielding 7.5% but with a little development the yield could have been pushed up to maybe 11-12%.
Look at the 'property clocks' that Jones Lang LaSalle, CBRE, Colliers etc. produce. They will tell you where in the market cycle the different sectors of the market are. Also, there is lots of research available for free on the web at each of these companies' websites that will give you a very good understanding of the business drivers
Like in residential investing, you want to find a site that will give you options. In particular, most opportunities come from changing the use of the property.
Lastly, commercial property is very much about relationships and problem solving but it is not rocket science. With tenacity and dedication you will do well.
Cheers,
Ben
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