Whether you are buying or selling real estate, it is critical that you have the property inspected and that you disclose any issues that are required by law to disclose. For example, you may be legally required to disclose lead, asbestos or other toxins in the home. Failure to do these things can result in fines or other issues. However, it isn't always easy for real estate buyers and sellers to know what they need to do. Hi, my name is Mary. I have been investing in real estate since the week after I left uni. I love it, and I have learned a lot along the way. I want to help and inform others so I decided to make this blog. I hope you find it useful.
While residential property often captures the headlines of investment blogs, commercial real estate (renting to businesses rather than people) can be just as positive an investment. Here are reasons that commercial real estate can be a great investment to help fund your retirement.
Better rental returns
Commercial real estate has higher average rental returns compared to residential properties. Yields can range from 5 to 10 percent, and this can be an ideal way to maximise income during retirement. Also rental periods are often longer and can be negotiated on a multi-year basis, with built in rental increases each year. By reducing the vacancy rate, you have a higher overall rental yield as well as less stress as an investor!
The downside of commercial real estate is that it is more vulnerable to the general economic climate, and if your client goes out of business you may find other businesses also going out of business in the same area. For this reason, attracting high quality clients (such as government offices, or long term business with strong references) is very important. If you are not comfortable getting reviewing financials, getting some assistance from an experienced commercial real estate expert can be a good idea.
Continued access to credit
Banks are very comfortable with lending towards property investment, albeit often at a higher loan valuation ratio (LVR) compared to residential loans. Being able to loan against the property means that you can enjoy the tax advantages of reducing your taxable income by the interest amount while you are still working, making it a great option for people with longer term retirement plans.
The agreement for costs is slightly different for commercial properties. Many of the ongoing costs such as rates and water are covered by the commercial tenants. This needs to be weighed against the higher costs of maintenance, for instance the costs of painting large properties or annual commercial air conditioning servicing. As part of the sale you can request historical amounts for these costs to make a full assessment.
As you can see commercial real estate can be a valuable part of a retirement investment portfolio. Given the different dynamics of the commercial real estate market, you should spend sometime researching the best areas for your potential commercial real estate investment. Also, as commercial real estate agreements are often more complex than residential leases, you should get some professional advice from an experienced commercial real estate broker.Share
24 November 2015