Residential real estate investments were mainly focused on most real estate investors in New Zealand, as it is an easily understood form of investment, gate less vacancies and can be more easily salable in a depressed market. .
For these reasons, many investors have largely neglected investments in commercial property; Even though this property class can provide you with much more return levels than a purely residential investment. An immediate benefit to the owner is that commercial tenants pay for expenditures on buildings such as insurance, tariffs, the mandate for the construction of fitness fees, repairs and maintenance and often management fees.
As a property investor, if you want to diversify your residential investments, then the commercial property would be the next logical step. However, it is true that residential investors often manifest themselves to enter the commercial real estate market due in part to their lack of understanding of the driving factors behind commercial investment and the risk perceived in the recovery of a property should become vacant. .
The vacant commercial properties have certainly suffered more than residential in the past when it comes to finding a tenant and prolonged vacancies can occur. In addition, getting a new signed tenant can be expensive. Agent fees from 13% to 15% of the strides of the early years and incentives such as rent holidays and / or assistance for fitout costs are often expected.
It is therefore important that you have a lower level of borrowing than your home so you can get out of any prolonged vacancy. In this spirit, banks generally do only sixty percent of the value of a commercial property anyway.
The commercial real estate investment has always been focused on the location, however of equal importance is the associated rental that works with the property, as this provides the source of income for the investment.
The strength of a tenant alliance to respect their lease obligations and pay rent is one of the most important issues of commercial real estate investment.
Coupled with this length of rental contract is also essential. Long-term rental contracts (six to ten years older renewals) are very sought after as they gave you, the investor of the property, a much reduced risk profile of having an empty building, especially when An alliance of sound tenant is also provided.
Other important factors, you should consider including the location to ensure that the building is well placed towards local service centers, is accessible to main roads or highway systems and can ideally benefit from visibility and visibility. profile for traffic. As the owner, you must request that the building could be restored easily and efficiently if the vacant existing tenant?
Buildings must ideally be adaptable to a range of alternative uses to meet future tenant requirements. Specialized goods lack this attribute and are therefore more at risk of long-term vacancy if a tenant is lost.
Multi-local premises are well sought after by investors because they provide good income spread and risk reduction associated with any vacant space compared to a single tenant building. However, they carry with them more management problems.
Any real estate investment should be considered a long-term strategy and as a commercial investor, you will see that in time, you have seen rents increase considerably more than a similar residential investment. When economic times are good, fast increases in lease levels have been observed. With most rental agreements that provide for two annual rent magazines, this can lead to a considerably higher river roll and the value of the property over time.
The current low interest rate environment meant that positive returns on commercial investment are now being appreciated when borrowing costs can be said of 6.5% while the return on real estate investment commercial could reach 9.0% to 10%. This additional 3.5% margin is likely