5 things a first-time commercial buyer needs to know before investing

By Greg Bell

If you're looking to get into the commercial property game for the first time in your life, there's probably a lot you don't know.

The following items are all in the category of "need to know" as you progress through the process:

1) Why commercial is preferable to residential

The reason many investors choose commercial real estate over residential properties is straightforward: Leases tend to last longer than the one year that's standard for housing, and returns on investment can be higher. That fact alone may make it more attractive, but it also comes with more potential duties, including making sure the property is in the best possible shape for potentially more demanding business tenants.

2) It tends to cost more to get involved

Because commercial properties tend to provide more financial security for owners over time, the cost to get involved in that market is steeper than what you'll face with residential investments. Consequently, you have to weigh that higher initial cost against the potential return on your investment and determine what the best course of action will be based on your unique financial situation.

3) The Australian economy has been more resilient

Famously, and despite the ups and downs of the global financial sector in the past few decades, Australia has gone 27 straight years without a recession. Obviously, the coronavirus outbreak may alter your short-term plans. However, experts largely are confident that the commercial market here will remain relatively strong in the long run, even if it does take a slight step back given the global financial climate today.

4) Financing can be a bit different

If you're only used to securing financing for residential properties (if you have a personal mortgage, for example) the different approach to how banks help you finance a purchase is something you need to be aware of. While you can often get away with a smaller deposit with a residential transaction, some lenders may require you to provide 40% of a commercial property's value up front, depending upon a number of factors.

5) It pays to work with a pro

With all this in mind, whether you're a first-timer or a seasoned veteran of the commercial real estate business, you should never enter a sales discussion without the help of a professional. At Ray White Surfers Paradise, we can walk you through every step of the sales process so you have as much success as possible in your new venture. Get in touch today to learn more.

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