Buyers Register Blog

Property investment is a key pillar to both wealth creation and retirement planning for many Australians. Most people will automatically gravitate towards residential property as an investment for a number of reasons including:

• They probably understand it better
• They have limited borrowing capacity
• They are looking for a safe option
• Values are generally easy to determine

However, commercial real estate investment can offer benefits beyond residential so it is wise to consider both options before you take the plunge.

Some of the benefits of investing commercial property include:

• Longer leases - generally 5 year terms with automatic rent increases
• Better yields
• Tenants generally pay all or most of the expenses
• Commercial tenants are generally less emotional than residential tenants

Of course commercial real estate is not always rosy and there can be challenges that you don't encounter with residential real estate. For example:

• Properties can be vacant for months (or years) if the market is not in your favour
• Commercial lenders will often revalue the property every few years and a drop in value may mean you will need to invest more money into the property
• If a commercial property is designed for a specific purpose and that purpose no longer attracts tenants, you may be up for significant expenses to remodel the property
• The business landscape changes are out of your control. Your tenant may be great at what they do and run a profitable business. Suddenly, a competitor opens up around the corner and slashes the profitability of your tenant and his ability to pay the rent.

Before you dive into either residential or commercial real estate investment, talk to someone who has worked in both and can steer you in the right direction.