Have Extra Cash? Here’s Why You Should Invest in Commercial Property

If you have a family, it’s really important for you to have other sources of income. Your day job may already be great, but children sometimes have demands–legitimate or otherwise–that can potentially break your family’s money structure.

If you have extra cash now, a good move will be to invest it in something. While saving it in the bank can give you interest, the interest rates can never come close to the money that it earns when invested.

extra cash - invest in commercial property

Where to invest it? This article outlines the most important reasons investing in a commercial real estate in Australia is going to be great for you.

Yields are better

When compared to yields from residential properties, commercial properties are generally more attractive because they tend to bring more money to the owner’s pocket. This is due to the fact that many commercial rental contracts are long-term; within that long period, rental increases are pretty much allowed and even expected. In fact, rent increases can already be laid out in the contract. It’s not uncommon for ten-year contracts to include 3% to 4% annual increases. The rate increase can still go higher, depending on how good of a negotiator you are.

For this to work more to your advantage, you’ve got to have great marketing skills. Unless your property is in a busy business district or any other commercially attractive spots, you can’t just sit around waiting for potential renters. You need to advertise your place the best way you can. Sometimes, there might even be a need to incentivize those who actually choose to sign up with you. Giving up a few months or years of rent (depending on how rent is computed in the contract) is a common reward for renters.

Lower improvement and maintenance costs

Simply put, you don’t really have that much of a say as to how your space will look once you’ve rented it out to a commercial entity. What attracted them to your place might not be the same factors that attract their customers to them. So, commercial renters usually use their own money for landscaping, renovating, and decorating efforts. They even do some of the repairs themselves. This saves you a lot of time and money.

Some commercial property owners put up guidelines for implementing structural improvements, and they make it very explicit in the contract. You can also do this to protect your property from being morphed beyond recognition.

Easier to diversify

A common investment advice is to not put all your eggs (money) in one basket (domain). If you do this, all your eggs will be lost once the basket is shaken. This is what’s most likely going to happen with residential properties.

But with commercial properties, diversification is a lot easier. In Australia, there are different types of ‘hot’ commercial properties. From stand-alone office buildings to warehouses and scrap yards, there are a lot of commercial properties to invest in. You can always vary the industries that you target in your portfolio. This way, when there are problems in one industry, the steady flow of income in another industry can help you stay afloat.

Now, while we focused on commercial property in Australia for purposes of this post – you can take this information and apply it to anywhere in the world. Do your homework and you’ll be seeing growth in your portfolio in no time!

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