It’s still property investment, but unless you’ve done it before, it’s not what you think it is.
In an environment of lower returns on investment across many asset classes and property in particular, in order to get a good return, you have to factor in the expected capital gains. With residential property, there’s generally a trade-off between getting a good yield (good rent relative to the value of the property), with expected capital gains. An Auckland 3 bedroom home may go up in value better over time, compared to a 3 bedroom home in say Hamilton, which could provide a better yield.
Commercial property is different:
- The tenant usually pays for all outgoings
- You can influence the value more directly by improving the lease terms
- Access to lending is often a bit tighter, and more expensive
- Vacancies can last longer, but there could be more certainty with cash flow over time
On the whole, there are more positives than negatives and it’s a true-ism that residential property investors often ‘grow up’ to be commercial investors later on. I can see why.
There is, however, a huge elephant in the warehouse here – the barriers to entry are higher with commercial . Not only do commercial properties often cost a lot more than residential, but if purchasing direct, you have to have a much higher deposit to even get a foot in the door.
Jack and Brandon have a broad discussion with me around the benefits of commercial property as well as touch on some different ways you can partake in this investment: Direct, through a syndicate and through a fund (unlisted or listed).
This is a must-listen for anyone thinking of getting into a commercial property at some stage. Newland Burling, the company Jack and Brandon work for, also do a commercial property master class and it’s a worthwhile exercise to head along – let them know you found them via this podcast. You won’t get a deal but you’ll be the teacher’s pet!