Inside Commercial Property #4 Crunching The Numbers
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Sep 4, 2020 Steve Palise, head property strategist at Rethink Investing, dives into the intricacies of commercial property investment. He compares it to buying residential properties, shedding light on the essential upfront costs and the varying growth rates of different commercial assets. The discussion highlights lucrative cash flow opportunities and offers strategies for navigating debt and enhancing portfolio growth. Palise also addresses the impact of recent market trends, including shifts in demand for different property types post-COVID.
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Higher Deposit Enables Faster Payback
- Commercial properties typically require a 30% deposit, higher than residential's 20%.
- A higher deposit is offset by better cash flow, allowing investors to recoup initial extra capital in about 2 years.
Commercial Yields Are Net Yields
- Commercial property yields appear higher because tenants pay outgoings like rates and maintenance.
- This leads to much better net cash flow than residential properties where owners cover these costs.
Vet Commercial Tenants Diligently
- Vet commercial tenants thoroughly by checking financials, business reputation, and rent payment history.
- Strong tenants reduce investment risk and ensure steady rental income.