Everyday property investors largely stick to residential property, despite the likelihood that at some stage their thoughts would have drifted to the prospect of investing in commercial real estate.
Why might this be the case? Is the thought of investing in a house more familiar and comfortable? National Property Manager at WBP Property Group Phillip Walter has put forward an interesting collection of five myths about investing in commercial property on Realcommercial.com, and we have a look at them here.
1. Commercial property is too expensive
It’s true that plenty of non-residential properties are very expensive and out of reach for many, but it’s also true that not all of them are.
Small factories and offices in inner-city areas are an example. It’s not how much you spend but the quality of the asset that is important according to Mr Walter. For example, a premise close to access roads and public transport.
2. You need partners
Investors often feel the high risk and high cost of commercial investment requires them to be part of a syndicate. While being in a syndicate could well allow you to buy bigger and more expensive property you can still invest in affordable commercial property and avoid the complications that come with investing with other people.
3. It’s too risky
When investing in non-residential property there’s the property itself and then the business component – the lease.
It’s this lease component that is most risky, so investors can ensure they leave no stone unturned and review lease conditions carefully while also getting professional advice to cover all bases. If these risks are kept to a minimum investors can then reap the higher rewards of non-residential property.
4. I don’t know anything about commercial property
Both types of property investment can be complex, just like residential, research and knowledge are keys to success when it comes to commercial property.
It’s wise to get professional help with the complex matter of leasing your commercial property.
5. Commercial property development is too complex
Commercial property development is getting more and more popular, there are an increasing amount of first-time developers in the market.
Developers are often happy to pay high prices for property and vacant land in inner-city areas that have flexible zoning laws.
It’s important to consider the local infrastructure when buying a development site. The usual suspects of roads, public transport, shopping and associated facilities are what you’ll need to look for. How much demand your type of property and how many others there are like it will be the key factors in how your commercial development property performs.
