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What factors into commercial property yields?

By Greg Bell

There may be many reasons you want to get into the commercial property industry, but like just about any other business, the answer will boil down to money on some level. As such, you may be wondering exactly what influences the return on your investment you will realise over time.

The answer, as you might imagine, is multifaceted. Some of these factors may be obvious even to a relative real estate novice, and others may come as a surprise. Read on to find out more about what influences commercial property yields:

Location

The first three rules of real estate are simple: Location, location and location. It's just as true for commercial property as residential. And it's not just about whether a given property is in a booming city or sleepy town, but also where exactly within that locale it is, what's nearby and more.

Type of property

The designation of "commercial property" encompasses a lot of different types of spaces. You could buy a small property ideal for a retail store, an industrial space that could become home to a bustling warehouse, an office building where white-collar work is the standard – and many more. Each will generally have their own typical yields that you must research before making a decision.

Demand

As it relates to the above, you will need to consider how much demand there is for the kind of property you want to buy in the area where you're looking. After all, if you can reasonably count on a space to spend relatively little time sitting vacant after a tenant leaves, that will have a big impact on your annual yields.

Cost of ownership

When you own a property, it may seem like a situation where you get steady income for relatively little work or consideration, but commercial property ownership is hardly a set-it-and-forget-it proposition. There are costs associated with maintenance and management (which you can take on yourself or farm it out to a property management company), as well as taxes you will have to pay on an annual basis.

When you're trying to navigate the commercial real estate market so you can make the right investment, there are many things to consider. Working with the experts at Ray White Surfers Paradise can help you figure out exactly what's going to work best given your unique interests and financial situations. Give us a call today to learn more about how we can guide you on your journey.

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