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How do you buy commercial real estate?

By Greg Bell

Commercial property really does come in all shapes and sizes – from childcare facilities to retail spaces right through to major office buildings and even car parks. If it's time for you to start your commercial property portfolio, you'll need to know how to go about buying this unique type of real estate.

It's more complex than buying a residential property, and the process for making money out of it is very different. Beyond just the purchasing phase, you may require a property manager, even if you have years of experience in the residential investment game.

Here's what you need to know:

1. Location is key, and different to residential

When you buy a residential property, you look for lifestyle features in a region. Commercial property requires more of a business nose. For example, if you're buying a warehouse, you'll be looking at how close it is to transport hubs, if it's in a primarily industrial area, how easily trucks can access the site for pick-ups or deliveries, and if there is an oversupply of warehouses in the surrounding area.

You don't want to limit the businesses attracted to your property because the neighbouring streets are too narrow for a large truck to drive down, or because there are too many warehouses in the area and you can't keep pace with the leasing competition.

2. The size of your property matters

If you buy a large commercial property on the Gold Coast, you will be less likely to lease it to small businesses. The same goes in reverse. Further, it will be more expensive to hold a large commercial property (in terms of taxes), and your lease payments might not take that into account.

Before you buy, you should check the structure of the property and make sure it's easily changeable. If you buy a large retail building and two small businesses want to split it, you'll need to ensure they can easily install a partition of some sort to separate the spaces.

3. Buying through an SMSF provides you with tax benefits

Buying through an SMSF is complex, but it can provide members with some tax benefits. If you're already a member of an active SMSF, half the battle is done. If you haven't ever thought about starting one, now could be the perfect time. However, be warned – it can be an expensive endeavour with a lot of hard work involved. If you don't have a sufficient amount of capital to invest upfront, an SMSF purchase could end up costing you more than buying as an individual entity.

What's more, you may need to hire a tax auditor each year to ensure you're doing all the right things. Think carefully before you open an SMSF to buy your commercial property.

For more information about buying commercial property on the Gold Coast, or to speak to someone about property management, get in touch with Ray White Commercial Gold Coast today.

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