Ever considered investing in commercial property – but you’re scared about all the unknowns? Scott O’Neill from Rethink Investing busts some of the myths about commercial property investing with Your Investment Property magazine editor, Sarah Megginson.
It’s often believed that commercial investing is only for the wealthy, perhaps because commercial investing used to be an investment that required a decent deposit of 30 to 40% deposit to get started.
But, that seems to be changing – and the myth that you need a high deposit to invest in this asset class could be preventing everyday Australians from strong investment options.
Another big myth?
“That you can’t get capital growth quickly out of commercial investments,” O’Neill says.
“Some of the fastest growing deals I’ve ever seen have been in commercial. I even had a property myself around the Newcastle area that was a little warehouse. In one year, it grew 26%. Now, it grew that quickly because basically the interest rates were dropping and we negotiated a slightly better lease, and basically the market wanted to pay more than what I paid for. But, residential properties didn’t grow that quickly in that area.”
You can “almost guarantee” a better cash flow and yield from a commercial property than what you would receive with a residential investment, he adds, so with strong growth prospects in the mix, it can offer the best of both worlds.
“One of the main things that impacts growth is rental increases… if you can get the rent up, that’s a way of creating equity,” O’Neill adds.
“Something I always look for where possible is to find properties that are under-rented, because you know what you need to do and you’ve got to obviously work with the tenant. You don’t want to annoy them or push them out of their premises. But, the minute you raise the rent, the minute you get more equity in, values tend to actually honour that as well.”
Watch our full interview above, outlining which other big myths could be standing in your way of reaping the rewards of commercial property.