COMMERCIAL INVESTING - MUMS &
DADS
8th November, 2005
Mum and dad investors could do well to look to
commercial property, as long as they understood the key differences
from the residential investment market, said local buyer's agent
Liz Sterzel.
Ms Sterzel, of Property Wizards, said while many
residential property investors had a good knowledge base that
would allow them to successfully make the jump to commercial
investing, others could get caught out.
"There's a world of difference between commercial
and residential real estate and for those who don't really understand
what they are, what looks to be a gold mine commercial investment
could become a nightmare," she said.
"Most people move into the commercial sector
because they're searching for a better rental return. That certainly
can be the case, but investors also need to know that in recent
times there's been quite a softening of the yields seen in commercial
properties.
"That means investors don't necessarily enjoy
the higher cash flow they might have anticipated - combine that
with higher vacancy risk if it's the wrong property, and your
cash flow could really be under pressure."
Ms Sterzel said that demonstrated that careful
selection in this market was critical.
She also advised people looking at buying commercial
property to thoroughly investigate the lease as it could be
extremely complex.
Investors would also do well to employ a good
property manager, consider the likely tenant base for the property,
pre-determine a budget, closely analyse cash-flow and capital
growth prospects, and understand that start-up is generally
more costly than residential.
"Seeking first-class advice on what it means
to step into the commercial property arena is imperative, or
making the move could be costly," she warned.
