A Quick Commercial Property Investment Guide
Investors in the country have started to realize that investing in australia property investment is a viable option since refinancing of home loans is becoming more difficult, and the market for investing in properties is becoming too hot. The best option is to diversify your investment portfolio to include commercial properties.
What do mean by a commercial property?
Commercial property is income or investment property, and also as commercial real estate. It refers to a piece of land or a building that generates profit for rental income or capital gain.
What are the types of commercial real estate?
A commercial real estate gets defined as a property whose assets get used for the purpose of doing business. There are three standard categories of commercial real estate:
Buildings for offices
Property where industries are present
Buildings housing restaurants and retail centers
Buildings for housing multiple families
Land used for farming and agriculture
Additionally, the following can also be called as commercial real estate:
Hospital and medical centers
Hotels
Warehouses
Shopping malls
Property developed for self-storage
What is the difference between investments made on residential and those made on commercial properties?
When you buy a commercial or residential property, you expect to get rent from it when you lease it out to a tenant. But the major difference between investing in a commercial property and a residential property is the Rental Agreement. Commercial properties are rented out to business houses for longer periods like three to ten years.
There are other fundamental differences between the two like:
The tenant of a residential property is called a lessee in case of a commercial property
Vacancies between successive tenancies in the case of residential properties can be longer
Service and Goods Tax, as well as taxes on the purchase price, rent paid, and any other expenditure related to the property gets applied to commercial properties
Maintenance costs for an industrial property get paid by the lessee that tend to increase the net income on rent
What is meant by “Annual Return on Investment”?
The “Annual Return on Investment” is the sum of money that I s earned from the property. The collected amount is called the “yield” from the property and gets expressed in percentage terms.
When you decide to invest in commercial properties, you should know the answers to the following questions:
How much is the “return on investment” going to be?
How much is the “yield” from the property?
How do you calculate the yield?
The Calculation of the yield is obtained from the division of rental income in a year by the purchase price of the property. For example:
Gross yield = rental income per year / value of the property x 100
[Where, rental income per year = rental income per week x 52]
Keep in mind the above tips when investing in commercial property. You can also consult a professional broker who is an expert on financial matters regarding real estate to help you get proper funding for investing in commercial property. Securing eligibility for a commercial property loan can be much easier when you have a financial expert on your side. You can get the best possible deal that can meet your requirement and help you to achieve your objectives.
