Many people don’t realise that investing in commercial property can be affordable and sometimes costs less than many residential properties. Commercial property covers a range of options from office and retail space, industrial properties such as warehouses and factories and even car parks.
Obtaining a loan to invest in commercial property
There are a number of different types of commercial property loans and most work in a similar way to loans for residential property. Commercial property loans can be variable rate, fixed rate, a combination of the two, principal and interest or interest-only. Additional features like an offset facility or the ability to make fee-free additional repayments may also be available.
Often a deposit of at least 30% of the purchase price is required to secure approval for a commercial mortgage. One option for home owners to consider is offering your home as security for the loan to try and obtain a lower rate.
Your Made For You Finance broker can help you select a commercial property loan that’s right for you.
Is commercial property right for you?
Here are some things to consider:
• Longer term leases: Leases for commercial property are usually for longer periods than residential properties.
• You don’t have to pay maintenance costs: Unlike residential property, the lessee not the landlord pays the costs of maintenance, rates and repairs for a commercial property lease. This means less expenses for you and more of the rent goes towards your profit.
• Location, location, location: Like residential property, location is an important consideration when investing in commercial property. Think about whether the property has good transport links, other workers nearby, and surrounding businesses that could offer support to lessees.
• Potential for higher rent returns: The rental return is usually higher for a commercial property compared to a residential one reflecting the fact that commercial property is usually regarded as a higher risk asset.