Let’s start with a test. Just Google ‘Commercial Real Estate Australia’ to see the vast amount of places you can park your money across the country.
To all the novice investors out there, let me cut through the noise. Here is an insight into the types of commercial property that will put you on the quick road to riches.
These can be small five plus apartments or multi story building covering city blocks. It does not matter if you are buying a block of five or five hundred; apartments are in high demand in every capital city in Australia.
Why are apartments a good investment? Because people need to live somewhere and they provide investors with great consistent cash flow.
The other great benefit for first time investors is that banks love residential property, but you can still go to them with all the numbers as you would with any other commercial property. For the banks it can be the best of both worlds.
The common upside of apartments is the opportunity to Strata them which will give you instant additional equity.
Our love affair with residential real estate has made investors and developers of apartments very rich people.
If we do some simple math on a building with 10 apartments rented at $500 per week each, an investor will have $260,000 income each year. Thats cash flow before mortgage payments and outgoings.
The downside of this is that it’s the scale that makes it commercial but you are still renting residential which means that tenants will expect you to pay for maintenance etc.
So let’s move on…
Next time you walk into the foyer of an office building, think of it as a money making machine!
Office buildings can range in value from one mil to one bill depending on size and location. But for first time investors, office buildings are an opportunity to start on the small and profit handsomely.
Many office buildings are already strata titled which means that you can buy a single office for a very low investment but still get 7% to 9% returns if you only have a small bank to start.
Most cashed-up institutional investors are focused on buying prestige buildings on Collins or Macquarie Street. This presents a great opportunity for smaller investors to buy in the outer suburbs with solid returns.
A very effective entry into office building investment is buying buildings with tripel net leases. A triple net lease makes the tenant pay rent plus operating costs. It is great for you, the investor, because they pay all repairs, maintenance, even insurance.
The good thing about commercial leases is that they are very flexible so you can negotiate this kind of lease which means you are not liable for outgoings which will increase your returns.
Office buildings are a good investment. Regardless of investment size, they all have one thing in common, consistent cash flow. Short story, more money in your bank account.
If you are looking to become the next Shopping Centre Magnate, Australia is the right place for you.
We love flexing the credit card and accumulating personal debt on worthless crap.
But while this might be bad news for your budget ,it is great news if you are a property investor.
You see, consumer retail spending creates demand for retail property. The more people buying stuff the more shops are needed to sell said stuff. Everybody wins.
Retail investments can be anything from large shopping centres to small suburban high street shops to what is know as ‘Big Box’ homeware stores like Bunnings.
Retail property provides a great first investment, primarily due to regular cash flows from leases. In some cases, retail leases contain a provision for investors to receive income from sales.
Just like office properties, many retail leases are written as a triple net lease. This reduces the total cash you will spend on an investment in additional to the purchase price.
So if you want to become a brand name billionaire owning the next Westfield or Myer, start your journey in retail and watch the cash registers, Kaching!
Of course starting small means you can look for single High St shops, or even mixed with High St shop and upstairs apartment. This gives you an additional income from the property which can help your cashflow.
This type of property can often be bought for no more than a residential house but produces a much higher cashflow.
As commercial property investors, we all must start somewhere. Not everyone can enter the market buying a 50 million dollar property with 5 million dollar rental income.
But as I have discussed in this article, there are many opportunities to invest in commercial real estate.
It does not matter if it is apartments, offices or retail properties, a first investment will help build experience and put you on the road to riches.
Now it is your turn. Get Googling!