If you consider yourself to be a bit of a savvy investor, or you’re trying your hand at a long-term investment, then Australian commercial property might be an excellent option for you. Rather than pile all your eggs into one basket with shares and stocks, you can branch out and try something new. However, commercial real estate is not something into which you can rush. You have to do your research, talk to the right people, and find a property that aligns with your needs. Ready to buy? Here are five top tips for getting on the commercial property ladder.
Know Your Finance Options
Most people are at least a little bit familiar with how domestic market finance works, but what about commercial real estate in Melbourne or another state? Before you decide that property investment is right for you, ensure you’ve ticked all the boxes concerning what you can afford.
Financing a commercial property is often a lot more complicated than the residential market, requiring specialised financiers. However, the lending limits can often be more lenient – such as up to 70 percent of the property’s value in some cases.
Discover the Market Drivers
Before you start doing all the formalities, have you put thought into what drives the market? Knowing the ins and outs can offer a glimpse into the future of what you can expect for your property and the area surrounding it. Market drivers can be anything from interest rates, population growth, and demographics, through to local expenditure and surrounding infrastructure development. Interest rates, for example, can decrease commercial and residential property demand because it slows growth, whereas population growth can speed up the need for it.
Know the Risks
As with any investment opportunity, you have to be well aware of all the risks before you decide to take on a commercial property in Australia. Even something that may only be a slight risk in the future is worth your consideration. These potential pitfalls could include significant infrastructure modifications you might need to make, the supply and demand for your property, and even lease terms and your property’s size.
Then, you need to think about your tax responsibilities and how that could affect your bottom line. You should thoroughly research any sticking point in a property agreement.
Learn Your Lease Lingo
If you are looking to buy a commercial building, it’s a good idea to at least have someone in the pipeline to lease it – or someone already in it. With new ownership comes the responsibility of a new lease agreement. What you put in it can make or break you. See a property professional to work out lease lingo, such as the leasing length, rental increases, outgoing costs for you and the tenant, and any special council approvals.
Know Your Tenant
Finally, have a vision for your property and know the type of tenant who will fit that space perfectly. Some buildings are available as a blank canvas which is fantastic, but some are already catering to specific industries. Before you decide to buy, consider the businesses surrounding it, what amenities it has, how many people it can fit, and what the previous owner or tenant did with the building. Knowing this information is essential.
It can be an exciting period in your life to make a significant investment, such as into real estate. However, it’s also something you should jump into with your eyes wide open. Talk to a commercial property expert and do as much research as possible. You can then call yourself an official commercial property owner!