Many Australians invest in property and residential property is often the real estate of choice for a lot of investors. Investing in commercial property is another option that some investors take but is it still a good move in Australia? What are the advantages of commercial property investment and should you consider mixing up your investment portfolio with both residential and commercial properties?

What Is Commercial Property Investing?

Commercial property investing involves investing in buildings and structures that are used by businesses and other commercial enterprises. It could be office space, retail space, industrial and production warehouses and factories. Even places such as medical centres and hotels are commercial property investment possibilities.

Rather than seeking capital gains or regular rent from residential properties, commercial property investors achieve those goals through renting out their properties to businesses.

Why Invest In Commercial Properties?

Let’s take a look at some of the key advantages and reasons why investors should consider investing in commercial property in Australia.

1. Long Term Lease Agreements

Because commercial premises are generally being rented out to people or companies who want to conduct business, you can usually contract renters to long term lease agreements. While the average rental lease for residential properties may only be about 6 to 12 months, often you can contract a commercial tenant for periods of up to 3 years or more.

2. More Stable and Consistent Rental Income

Due to the fact that longer leasing periods are usually the norm, this gives the commercial property investor more security and stability when it comes to deriving a consistent rental income. If you’ve contracted a tenant for 2 or 3 years, provided the business remains in business and profitable during that period, you can be assured of receiving consistent monthly rent. This consistency of income also makes it easier to seek out new properties to invest in, as you’ll have a stable income to take on new opportunities.

3. Command Higher Rents

How much you can charge for rent will depend on a number of factors, such as the location of the commercial premises, what kind of business is being run and so on, but generally speaking, you can command higher rents on commercial properties as compared to residential properties and houses. Coupled with the longer leasing periods, this spells great news for commercial property investors.

4. Commercial Loans Are Easier To Get

In many instances, lenders are more likely to sign off on an application for a commercial loan in comparison to a loan for a residential property. Commercial properties generate money and are therefore perceived as being less risky than residential properties. There are also more lending options when it comes to commercial properties. As a property investor, if you focus on the commercial sector, you’ll have a higher chance of being approved for a loan.

5. Low Interest Rates

Another important thing to note when it comes to investing in the commercial property sector is you can often secure loans for commercial buildings and office space with very low interest rates. This equates to lower financial pressure and a higher chance of yielding a healthy profit on your investments.

6. The Potential For Growth

If you do your research and homework and purchase commercial property in areas that are experiencing (or likely to experience) growth, chances are, the property will increase in value, giving you, the investor, the option of selling for a nice profit or even being able to ask more in rent.

Things To Consider When Investing in Commercial Property - A Quick Checklist

• Location - You’ll want to spend time researching the location of the commercial property to ensure it’s in a growth area and can yield the kind of returns you are aiming for.
• Vacancy - How long or how often has the building been vacant for over the past few years? This is a good indicator of whether it’s a viable investment option or not.
• Tenants - Does the building currently have reliable tenants on a long term lease? If so, it can be an asset when considering a property to purchase, as you’ll automatically have long term tenants on board when you acquire the property.
• Building - Look for modern buildings that have been well maintained and know exactly what the building has been (or can be) used for, regarding the type of business run.