Residential or Commercial- An alternate investment strategy
One of the effects of the current residential property boom is the rapidly diminishing supply of suitable property investments. So what is an alternate investment strategy whilst still having the security of “bricks and mortar”?
Lets have a look at the commercial, industrial and retail sectors and consider the key differences between those and residential investments:
- Commercial investments have longer lease terms
- They generally have stronger tenant covenants usually supported by a bank guarantee
- Commercial yields can be up to double that of a similarly priced residential investment
- Commercial leases usually have regular reviews to market or CPI and in most cases cant go backwards (called “ratchet clauses”)
- Commercial investments have a realistic prospect of consistent growth due primarily to the lease structure
- Commercial investment decisions are generally based on the asset yield rather than architectural nuances
- Bank and institutional finance is always available for the commercial asset class and in fact commercial investments requiring debt at sub $1m are currently attracting loan terms and rates on a par with residential investment loans
- And lastly- commercial tenants are normally responsible to pay all outgoings except land tax
We would suggest that these attributes warrant your careful consideration of the commercial asset class for your next property investment. And let us find the loan structure to support your investment. Call me for a confidential discussion Lynne Robertson mob: 0414 598271