Commercial/industrial/retail property as an investment
2 Smith Street Charlestown
Raine & Horne Commercial Newcastle
With nothing to be gained by having your money tied up in a bank, with the share market looking more and more like a bubble, and with interest rates not increasing many people are asking where do I place my hard earned dollars to get a secure and stable return. And the many are looking to commercial, industrial and retail property.
Investors look to commercial, industrial and retail (CIR) property as an income stream. Unlike residential real estate the CIR properties provide an investor with:
• Fixed terms of lease from 1 to 10 years and more
• Rents that escalate in unison with the CPI
• Tenants that guarantee their leases
• Leases that require the tenants to pay the outgoings such as;
o Council rates
o Water rates
o Land tax
o Non-structural maintenance
o Annual fire checks
o Lift or crane servicing
This provides an investor with a true net income stream. Real estate investment does not need to be purely focused on capital gain and negative gearing like is seen in the residential form of investment. CIR allows an investor to purchase an income stream which is more sustainable especially in retirement.
You can’t eat using a capital gain unless you sell but commercial investments allow you to live off the income generated.
The entry into this form of real estate is generally not much greater than a large well located house or apartment but instead of showing between 2% and 4% net as is the case residentially, CIR property will show between 6% and 10%.
A recent sale at 2 Smith Street, Charlestown was a case in question with four tenants in a free standing building with car parking returning $81,560 pa after all the out goings were paid and sold for $1,300,000 as a going concern. This was a low yield but still showed a 6.3% return.
Choosing multipurpose well located CIR property with good leases is far better than waking up one morning and hearing your portfolio of shares has evaporated overnight in a crash.