Real Estate

Quality Real Estate Investment Tips

Author: Ganes7

Investing in Commercial Property – What You Should Know

Research Research Research

Investors with sufficient capital (or those who are willing to borrow to invest), are typically able to invest in commercial real estate by buying a specific retail premises, office space, warehousing or industrial property.

Similar to residential property investment, commercial property investors should do their research and have clear buying guidelines before purchasing. Factors such as location and demographics, tenant quality and vacancy rates, the rental return (also referred to as yield) and likely future capital expenditure are some key things to research prior to investing.

Whilst individuals, partnerships, companies, trusts and self-managed super funds can invest in commercial property, when borrowing to purchase a property most banks will generally require a larger deposit of around 30%.

As a general rule of thumb, it is typically riskier to invest in a single asset, as opposed to a number of assets. The same goes with property investment in that it can be more risky to invest in a single property as opposed to a portfolio of commercial properties. The benefits of diversification will help to spread the investment (and risk) both geographically and within industry sectors such as retail, industrial and office property investments.

Real Estate Investment Trust

As an alternative to direct commercial property investment, and to achieve diversification in property, investors have typically turned to Australian Real Estate Investment Trust (A-REITs), property syndicates or managed funds.

A-REITs, previously called Listed Property Trusts (LPTs) are investment trusts, which provide investors with unitised holdings in a professionally managed portfolio of commercial properties located both locally and internationally. A-REITs are listed on the Australian Stock Exchange (ASX) and offer investors the benefit of investment in property, but with liquidity, (option to sell) and the opportunity to invest in a range of properties that are typically unavailable to smaller investors.

Prior to investing in A-REITS, careful consideration of a number of factors should be made including; whether the fund has provided consistent returns, the reputation of the property management, types of properties in the portfolio, liquidity offered, level of gearing or borrowing in the fund, the nature of distributions and whether there are franking credits and/or tax deferment. Because the A-REITs are listed investments, the unit price can be more volatile. Sell my home in Laredo

Property Syndicates were particularly popular in the 1980s and 1990s, however since the Global Financial Crisis (GFC), factors such as lower yields, higher interest rates and uncertainty of property values has seen demand and popularity of these investments decline.

A property syndicate is a direct property investment, which is managed and marketed by a licensed property dealer. When investing in a property syndicate you should receive a Product Disclosure Statement (PDS), which has been lodged with ASIC.

What to Look for in an Investment

Making Informed Decisions

Have you been like a cat at a fish bowl, looking into the Australian property markets only to find yourself unable to make that final commitment? To help you we have spoken to some of our property management experts who lives and breathes property and asked them to share what they believe makes a good investment.

Where You Buy

Location is obviously the most important, and that can be narrowed down as much as a street, or even an aspect of the street that can make a significant difference to the potential growth of a property’s performance,” our agents said.

They assert that if you are looking for an area to invest in, a good rule to stick by is to ensure that it is within a 10-kilometre radius of a major city hub – an even smaller distance for smaller cities like Adelaide or Perth.

“Also, it’s sometimes a good idea to start your investment portfolio in an area that you live in, because you’ll know that market more than anyone else does,” they said. Tree removal

What You Buy

Our Property Managers stress the importance of not only focusing on the quality of the property you purchase, but also the size.

They have seen owners in the past caught out that way. They’ve gone and paid a price for a three-bedroom terrace, say in an area like Surry Hills, and it ends up becoming a two-bedroom rental because of the size of that third bedroom,” they said.

If you’re a first-time investor and can’t decide between purchasing a house or a unit, it is recommend you discuss your objectives with your local real estate agent and their experienced Property Management team as they will have a good perspective as to the rental capability of the property.

“Buy into an apartment building that is fairly modern – nothing too old where there could be a special levy raised as suddenly the building needs repainting because it’s 30 years old or the fire alarms need to be upgraded, for example,” they said.

When You Buy

Our agents believe there is never a bad time to buy property, you just may have to look in different areas depending on what the market is doing.

“The property market is only as abundant as the people pushing it. As soon as they step back, it is often an opportunity when you should jump in on investment property,” they said.

A proper understanding of the market is crucial. Going to open homes and viewing auctions to paint a clear picture of the market. If they’re all going crazy then that’s an indicator that it’s time to take a step back and wait for things to settle down.

Any Other Tips?

As some final pieces of advice, our agents said to not expect quick profits from property, be patient, take your family and friends’ critique with a grain of salt and ensure that you “engage a skilled and qualified property manager that has a good reputation, because that could make or break the investment”.

To take your property investment knowledge to the next level, the team of experts to put together a free comprehensive Better Buying Guide that covers all the key areas involved with buying in investment property. The guide will walk you through processes such as how different buying methods work, how to do your research and what questions you should ask when buying an investment property.

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