Commercial properties are one of the hottest investment options buzzing across the Australian real estate market. Investors who have come to the fore with an intention to invest in the Australian commercial property are captivated by higher returns and lower risk involved in it.
If you are also one of them, and want to make such investments to make the most of the hyped market, first understand a few things related to the commercial market including terms and conditions of commercial leases, GST implications, and others things. Your understanding of the matter would lead to a good and profitable decision.
In this article, we have included a couple of things that every investor should know about commercial properties before investing in them.
Types of commercial properties
When it comes to commercial property, one can invest in office, retail spaces or industrial properties. Approach a financial institute to get commercial property loan.
Commercial property is greatly regarded for offering higher return. For instance, you are likely to reap up to 8% returns on an industrial property such as warehouse.
Investment in commercial property also involves risk that comes in the form of higher vacancy rates. For example, if you have invested in an office space, it may take a few months or a year to find a new tenant. And you have to bear losses until you find a tenant, this situation could be tough to get past.
Duration of leases
Commercial property leases are for a longer period of time. And it is unusual to have leases for an initial five-year period with the option to review for another five years.
Quality of tenant
It goes without saying that tenant is crucial for investment. Apart from private company owners or retail companies, you can lease your property to a government or large corporate, known as a ‘Blue chip’ tenant. Such tenants are likely to rent your property for quite a long period of time and unlikely to default on the rent. Therefore, renting out a space to such blue chip tenants would be a great way to make maximum profits possible.
Higher cost of entry
You need to have deep pockets in order to enter into the commercial property market. Rates of CBD office or retail space is largely based upon its location and facilities available around it. Further, depending upon the size, an industrial property on the outskirts of a city also proves to be expensive.
Being the owner of a commercial property, you need not worry about outgoings such as council rates, insurance, repairs and maintenance, as these would be paid by the tenant.
If you are willing to invest, you can seek commercial property loans from reputed financial institutes.