Do you intend to invest in any commercial property? Do you have any sector in mind? Regardless of the strategies you intend to choose, risks will always be prevalent. However, depending on the investment type or nature, you will have to the magnitudes of the risks against the expected returns or even opportunities.
The commercial property area is a sensitive area since the investors want to gain amidst many challenges that exist in the property market. Therefore, developing an investment strategy for your commercial property investments is a wise decision that will enable you to capitalize on the opportunities that give you solid returns.
Why should you invest in the commercial property area?
Any person, whether an investor or a property agent, who has been in the property investment sector can attest to the main benefit that comes when you invest in a commercial investment; handsome returns.
It is evident that commercial properties attract higher rental returns compared to residential investments. For instance, the annual net income returns from commercial properties will typically range between 7 to 9% compared to those from residential properties that range between 2 to 4%, which is according to a certain commercial agency in the northwest. Therefore, any investor who appreciates those yield figures will surely invest in the commercial property sector.
As you think to invest in a particular commercial property, you ought also to the rental demand trend in the market so as to maximize your rental yields.
Know the trends that influence the property market.
Whenever you are engaging yourself in the commercial properties, be aware of the nature of the surrounding environment. Look around you! Check what is currently happening in the property market. It could be a good indicator to show you which investment ideas are currently viable and which ones are not in the commercial sector.
In the Australian market trend, the sector that is growing at a fast rate is the tourism sector. Over the last year, the country recorded 8.2 million international visits. This represents an 11.4% increase last year which made Australia record a triple of the world average inbound tourism of 3.9 %. This boom in the tourism sector has also been influenced by the falling Australian dollar. This implies that in the past 1 year, billions of hotel transactions have taken place inside the country raising a new benchmark for the hotel assets. Due to those facts, it is now clear that this sector has great opportunities that investors need to explore.
In Australian cities like Melbourne and Sydney, the occupancy rate for most hotels is around 70%. There is also an increasing trend of large-scale retail properties. One major example of such retail properties is the Bunning. As plenty of retailers looking to expand their retail occupation, there is also a repositioning of the Bunning stores. According to various analysts, as the footprint of Bunnings expand wide across Australia, more opportunities in this large-scale sector that is growing will be envisaged.
Diversify the portfolio
With an Australian economy that keeps fluctuating perhaps due to tourism and Bunning pressure, it is wise to diversify investments. As you diversify your property undertakings, you will be able to spread the potential risk on your investments.
In the commercial properties, there are many sectors an investor can invest in like industrial, retail, offices, healthcare, hotels, agribusiness, and other specialty properties. From a couple of years, the focus is shifted towards medical and health care regarding assets. Over the past five years, the focus for investment shifted towards healthcare and other medical assets. Some investors have even sold their industrial and office properties to acquire the healthcare properties.
Be on the lookout for peaks and troughs in the property market
In commercial investing, capital gains are rarely one of the major factors to consider but it gets a bargain that permits capital growth. Any investor who wants to examine this aspect should therefore keenly observe the peaks and troughs which usually are propagated by social, economic and numerous other factors.
The agribusiness and rural sectors are some of the commercial sectors that seem to be gaining momentum. The Australian market seems to have favorable and investment conditions due to various free-trade agreements and the falling Australian dollar.
However, there is still cyclical downturn in some retail sectors, specifically the department and clothing stores. It has made various investors turn to commercial properties that are of residential or mixed-use nature in an effort to spread risk in their investments.
Any commercial investment requires a reliable financing source. Many investors in the commercial property market opt to use SMSF finance. However, SMSF property investment also has associated risks. Therefore, you will require adequate professional financial advice when sourcing for such kind of funding as high-rental-yield properties most often attract low-capital-growth rates trade-off.
Apart from the SMFS, there are plenty of other kinds of finances that financial institutions can offer to finance commercial investments. Those finances majorly come as either secured or non- secured loans. In your strategy, know the source of your financing, whether it is a bank or another lending institution.
It is a fact that commercial properties investments can yield great returns. But, all will depend on the investors’ capacity to adopt risk-measured strategies that are well-researched that are within their budget limits. Therefore, as a prudent investor, check all the commercial properties that are within your vicinity and plan a good investment strategy.
To close up…
When planning for a commercial investment strategy, examine the market trend that seems beneficial and the accompanying risks. Take a careful examination of the market nature currently. Do not forget to get a professional financial advisor to advise you on various financial strategies for your commercial investment.
While you look for commercial properties that result in high yields, examine numerous of properties. When you see the one that interests you, check the zoning laws and carry out an inspection to certify that is viable for investing. Afterward, apply the strategy you have designed for the commercial property so that becomes functional.