As an agent who has worked across both residential and commercial property, I’m astounded as to how many investors are uneducated about the differences between residential and commercial property investments. In Melbourne, on average the current yield on residential property is about 2.9% with commercial sitting at between 6% to 7% on commercial industrial buildings and approximately 7% to 8.5% for medical centers, childcare facility’s and some retail buildings. So the question remains, why don’t more people invest in commercial property?, particularly when you can purchase a 200 to 300 sqm office/warehouse for less than what you can buy a house in most Melbourne suburbs for.
Depending on your situation, typically you can apply for finance to buy a residential property with a 10% deposit where commercial you will generally need 30% to 35% of the purchase price to obtain finance. In reference to superannuation fund purchasers, 40% of the purchase price is usually required. However once approved, just check out some of the benefits of investeing in commercial property listed below;
– Significantly higher yields providing you with a better return on investment (ROI)
– Commercial investments accomodate for longer lease agreements, typically 2 to sometimes 20 years (not 1 year like most residential property’s). Check this out, did you know that some owner/builders allow you the option of purchasing a property and pushing settlement out until a tenant is found? This typically takes anywhere from 1 week to 4 months and you do not have to settle until a tenant is found and there is a ROI in place. Advertising for your tenant commences immediately and during the settlement period to allow for a smooth transition.
– The tenant is resposible for the annual rent plus gst and all of the outgoings. Yes all costs are covered by the tenant!
– Potential for structural damage to your building is minimal as it’s mostly concrete. If damage occurs the tenants building insurance is resposible for any costs/corrections.
– With a good Property Manager in place all you need to worry about is your ROI and of course the Property Managers fee per calender month. Now correct me if I’m wrong, but less stress and a higher ROI promotes a better quality of life?
Hopefully this information has provided you with some insight into residential and comercial property investments. If you have any questions please do not hesitate in giving me a call on 0405646946 or shooting me an email to firstname.lastname@example.org
All the best,
Fullarton Real Estate