One of the main attractions of investing in Commercial Property is its security.
Unlike residential property … Commercial Property is generally still there performing for you, if the economy does slow down.
However, when the economy is strong, Commercial Property grows in value and provides you with a steady income.
Anyway, for those of you starting out … here’s a list of the benefits you’ll enjoy from successful Commercial property investing.
Benefit #1: Strong Returns
Commercial Property provides strong and reliable returns in the form of both income and capital growth.
Your aim ought not be looking to make a quick gain. But over time, you should achieve a solid return consistently above inflation.
Benefit #2: Stability of Income
An important point to make about Commercial property is that … not only are the returns higher, they are usually more secure.
Unlike the short-term leases for residential property, Commercial Property leases will generally range from 3 to 10 years.
Benefit #3: Lower Risk
Taken overall, Commercial property investment tends to carry less risk than residential property or the stock market.
Benefit #4: Exposure to Different Sectors of the Economy
Retail and industrial properties probably have the highest direct relationship to the economy, with retail property dependent on consumer spending trends.
Whereas, office buildings tend to perform based upon long-term supply and demand.
Benefit #5: Tax Benefits
You will also find Commercial Property provides you with generous tax benefits.
Depreciation allowances on plant equipment are quite significant (on things like … air conditioning, carpets, lighting and so on).
But that’s just part of the benefit — as most Commercial properties also attract handy building allowances is well.
Benefit #6: Hedging against Inflation
Historically, Commercial property has been viewed as a good hedge against inflation.
Commercial Property certainly has an excellent record for outpacing inflation over a long period of time.
Benefit #7: Investment Control
As an owner of direct property, you have a significant degree of control over your investment.
Areas such as: renovations, upgrading, a change of use for the property, the terms of the lease, the type of tenant, redevelopment and disposal.
Benefit #8: Ability to Add Value
Ways for you to add value to a Commercial Property would include: renovating, upgrading, subdividing or enlarging, improving the appearance and restructuring the lease.
Benefit #9: Leverage
Through astute borrowing against your Commercial property investments over time, you are in a position to quickly control a sizeable portfolio of properties.
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'The 9 Benefits You Can Gain … From Investing in Commercial Property | Chris Lang' have 3 comments
March 2, 2014 @ 12:05 pm Bob the builder
Your opening line ” unlike residential property ……. commercial property is generally still there performing for you, if the economy does slow down ” is the complete opposite to what I have experienced.
I have an industrial building that has recently been re valued at the same value we paid for it almost ten years ago. Sure the rental return has been reasonable but that is all.
I have residential properties that have increased in value by at least 50 % in the same period.
Your point #3 seems questionable to me. Surely if there was less risk the banks would lend a higher percentage. Try getting a 95% loan on commercial property or shares and sit back and observe the reaction from your lender. Be ready to pick them up off the floor.
We required a 30 % deposit for the industrial and 95% with LMI ( this was prior to the GFC ) on the residentials so have experienced a much better return on our investment with the residentials.
We have also been able to leverage off the increased value of the residential properties to finance further aquisitions which certainly can’t be said of our industrial property.
Our properties are all within 20km of Sydney CBD and the last six or so years haven’t been kind to Sydney’s economy but the fact remains that the only growth we have achieved has been with residential which is currently snowballing quite nicely.
I hope we are about to see some long overdue growth in the industrial property as we are in it for the long term.
March 21, 2015 @ 12:38 pm Andrew sotiropoulos
There are many dis-advantages in owning commercial properties as well as the above-listed benefits however, if you choose the right commercial property it will bring you very strong capital growth as well as an awesome rental return for many-a-year which can’t be matched by residential but that’s IF you choose the right one.
March 21, 2015 @ 5:38 pm Michael Yardney
Thanks for your comment Andrew. Of course you’re right and most investors don’t really understand what makes a good commercial property