Residential Or Commercial Property Investment?

Investing in residential real estate is a major focus of most New Zealand real estate investors because it is an easy-to-understand form of investment that has a lower risk of vacancies and is easier to sell in a stressed market. You can also look for the best commercial property for lease in Melbourne.

For this reason, investing in commercial real estate is largely overlooked by many investors; However, this property class offers significantly higher returns than a pure residential investment.

The immediate benefit to landlords is that the commercial tenants pay for construction costs such as insurance, pricing, security costs for the gym, repairs and maintenance, and often administrative costs.

As a real estate investor, if you are looking to diversify your residential investment, commercial real estate is the next logical step. However, it is true that property investors are often cautious about entering the commercial property market, in part because of a lack of understanding of the drivers behind commercial investment and the perceived risk of renting a property if it is vacant.

In the past, vacant commercial properties must have suffered more than residential properties when looking for tenants, and long-term vacancies could arise. Additionally, registering new tenants can be expensive.

An intermediary fee of 13% to 15% of the rent for the first few years and incentives such as vacation rentals and / or assistance with fitness costs are often expected.

It is therefore important to have a lower occupancy rate than residential buildings so that you can attract vacancies in the long term. Against this background, banks typically only lend up to sixty percent of the value of commercial real estate.

Commercial real estate investing is always primarily based on location, but the associated lease working with the property is just as important as it is a source of income for the investment.

A tenant's willingness to meet lease obligations and pay rent is one of the most important issues when investing in commercial real estate.

Apart from that, the term of the lease is also the most important thing. Long-term lease contracts (six to ten years plus an extension) are in high demand because they offer real estate investors a greatly reduced risk profile for an empty building, especially when there is a stable lease agreement.