Can You Really Make Money With Commercial Real Estate Investing?

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Can You Really Make Money With Commercial Real Estate Investing?
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Investing in commercial real estate may sound like an intimidating proposition to many, but in fact it is the most rewarding venture that proves beneficial if done right. From dazzling skyscrapers touching the skyline of Melbourne and Sydney to small office complexes speckled in the suburban regions of the nation, commercial property can be seen everywhere. The soaring prices of these physical assets have turned many seasoned investors into millionaires who chose the right markets at the right time. However, an air of skepticism still shrouds the purchase decision of the investing population who avoid charting the territory of commercial property for sale in Australia. These doubts can be easily quashed by the remarkable performance of the industry over the past few years.

According to the Property Council of Australia, the property industry is the biggest employer in the country. There has been a significant contribution of the sector in the GDP. As per a 2012 report, the expected Australian institutional grade commercial property stock was approximately $681 billion. The report further stated that the size of the market including offices, retail spaces, and industrial units is $280 billion, and 70% of this segment is owned by home-grown institutions. With rising qualified professional population, Sydney and Melbourne boast of the best investment opportunities that are being sought from people across the globe.

Since the trading of commercial properties usually happens behind closed doors with minimum public disclosure, their value is not genuinely appreciated in the capital market. This valuable asset generates money through income and appreciation. Renting out commercial spaces to retailers, industries and businesses yields an ongoing income and appreciation comes through increase in the cost of the property over the years.

An interesting example of building a fortune from commercial real estate is of the current US president Donald Trump, who owns the most illustrious office structures, hotels, casinos and golf resorts in premium locations of the United States. In the 1970s, when New York brought in tax breaks for willing commercial real estate investors, Trump took advantage of the situation and got loans for construction with little collateral. This made him a celebrity in the industry circles with his business empire looming large over the competitors and reaping in the capital. Though he suffered a setback in 2004 when the Trump Hotels and Casino Resorts filed for Chapter 11 bankruptcy, he came out of it unscathed to restore his supremacy in the domain. If you too have been nurturing a dream of buying commercial property for sale in Melbourne, but are confused whether you can really make money out of it, then this article must settle all your doubts.

Here is a rundown on how one can really make money through commercial real estate investment:

 

1.   Renting Out The Commercial Property

A commercial space yields better rents than a residential property. For example, if you buy a retail shop in a busy area, you can ask for a profitable rent which would be much higher than putting up a flat or house for rent in the same locality. Similarly, office spaces generate a high return on investment with a steady monthly cash flow. If the office is located in a business district, it is bound to be rented out by an established company with high paying capacity. Also, being in a strategic location means that you can negotiate further to crack the most successful deal. Also, the lease term is longer in case of commercial properties usually ranging from 3 to 5 years whereas the lease term for residential homes expires after 6 months or a year. This makes the owner get into the trouble of looking for a tenant every few months.

 

2.   Offering Advertising Spaces In The Building

Even after renting out the office spaces in a building, the owner retains the control on the outer structure and the inside common areas. These can be offered to brands for being utilised for outdoor advertising using flex, posters, billboards or signage. A huge billboard on the rooftop of a building in a busy area can fetch good rent and add to the investment portfolio of the owner. That is why it is recommended to buy a commercial property for sale in Sydney or any other high-growth business area that promises better takings.

 

3.   Appreciation Of The Property

Though the real estate sector is volatile and subject to the risk of changing economic forces, these changes prove fruitful when the real estate prices go up and the purchasing power of the population follows suit. Just like appreciation of residential properties, the commercial property sector also appreciates with time. Often this appreciation is faster and higher than other sectors. Also, renovation and refurbishment further add to the value of the asset and increases its cost in the market. In some cases, the tenant invests in beautifying the premises as he wants to display an inviting space to his clients. Thus it saves the money spent in the maintenance and brings in more capital at the time of selling or entering a new contract.

 

4.   Gain From Additional Services

Every office building will have a parking space and garbage disposal system. While renting out the office space, you can charge for these services additionally for more income. Also, you can exclude the parking area from the rent agreement and use it for renting out to other parties and reserve a few slots for the tenant at a discounted price. Most of the tenants would happily pay for these additional services as they would not want to hire other companies for these facilities.

 

5.   More Gains And Less Expenditure

Investing in commercial property for sale in Brisbane or other parts of the country offers generous tax benefits with considerable depreciation allowances. The value and rentals of a commercial asset are usually unaffected by the inflation as they do not depend on consumer spending capacity. Most of the outings are paid by the tenant of a commercial building such as taxes and insurance and maintenance and repair work. They also work on the beatification of the premises which adds to the value of the estate.


Endnote

Commercial sector is a goldmine that can be leveraged by investors who can spot the high-growth areas in the booming cities of the nation. By following the right approach that includes due-diligence and market research, you too can make money by purchasing a commercial property for sale in Australia.

Author Info Manish Khanna

Manish is founder of Business2sell Group of Websites. 

Business2Sell.com.au is one of the leading business and franchise for sale listing websites. We work with our business brokers, commercial agents, franchisors and private sellers to help them connect with the right buyers for their opportunities. 

With website now functional in Australia, United States, United Kingdom, Canada, New Zealand and South Africa. We have over 18,000 businesses for sale listed, with over 220 Business Broker and Commercial Agent. 

I have over 20 years of experience in Web Industry; I have been involved in websites industry since the early years of 1996-97. In my professional career I may have worked for over 10,000+ websites. My Specialty is to build portals or complex online applications.

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