Tag Archive: Investment Property

Commercial Property – a Good or Bad Investment?

Posted on August 2, 2019
by Phil Grant

There is always a lot of conversation and discussion over residential property. Topics like where the market is, where it’s going, if it’s a good time to sell, stories of missed opportunities to name a few. What isn’t discussed nearly as much is the subject of commercial property. The reason is simply because the residential property market is bigger – there are more people than businesses.

But the question businesses should be asking is whether buying commercial property is a good investment? This can be a difficult decision to make with limited information available. So here let’s go through the pros and cons of purchasing commercial property.

Pros

  • Gross rental yields are usually much higher than residential property, averaging 7-8% compared to residential property gross yield of 3-4.5%
  • Lease terms are generally longer than residential properties which provides security for tenancy and financing purposes
  • Interest rates are very low at the moment which keeps the financing costs of the property down
  • If the commercial property is to be used to run your business you may be able to access small business Capital Gains Tax concessions upon a sale or transfer of the property
  • A commercial property may be owned by your SMSF which can provide you with both short term and long term benefits

Cons

  • Generally it is harder to find tenants for a commercial property than a residential property
  • The value of the property generally doesn’t appreciate over a period of time like residential property
  • Finance to purchase a commercial property is generally more difficult to obtain than a residential property
  • The option period within a commercial property lease is at the discretion of the tenant

So is commercial property a good investment? Well I can’t say yes or no for you because every person’s situation and business is different and every property is different. However if you think about your own circumstances and run through the pros and cons like those outlined above, then I’m sure you’ll come up with the right answer for you.

If you have any questions and would like to discuss your business situation, please get in touch with our team at BLG Business Advisers online or by calling 02 4229 2211.

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What Does the State of the Property Market Mean to You?

Posted on December 3, 2018
by Angela Bernardi

Every newspaper article you read says Sydney and Melbourne housing prices have fallen. The amount they have fallen by varies on the day and the paper you read but most hang around 5 to 10%. With the cost of borrowings higher, most analysts expect further falls in property prices of our two big cities of 10% or more.

The tightened lending policy restrictions and recent rate rises from ANZ, Commonwealth Bank, Westpac and a number of small lenders have contributed to the fall.  In saying that, no one is expecting the RBA to lift the cash rate this year. The call on when the cash rates will be lifted continues to be extended. The estimated time frame depends on which bank you look at. Macquarie Bank are suggesting that falling house prices, and uncertainty about the outlook for housing activity and credit availability, give rise to the RBA to sit tight on the cash rate until early 2020.

What does this mean?

If you aren’t looking to sell and your property is a long term investment, it doesn’t mean too much, sit tight and ride the next wave.

For first time property buyers, saving a deposit may be easier if house prices drop, but the cost of funding will be higher.

For those looking to upgrade, as lending standards are becoming tighter, you might want to do your homework before applying for a loan on a more expensive property. However if you are jumping in and out of the market at the same point in time you will be no worse off. If you decide to sell and wait for the market to fall you are taking a bet on the market movement.

For investors, the cost of funding will be higher and the credit restrictions mean it will be harder to obtain a loan. Again if you are waiting for the property market to fall you are taking a risk. Will it decrease slightly? Probably. Will it remain stable? Possibly. If you find the right property at the right time and it’s a long term investment you will be right to ride the wave.

We can’t say with certainty what will happen, only time will tell, but we can advise you on the best direction for your situation.

Are you looking to enter the property market or would like to discuss your current properties? Take this opportunity to get in touch with BLG Business Advisers online or by calling (02) 4229 2211 today.

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