The other side


When it comes to investing in property, most people opt for a lower-risk residential dwelling. But if you do your research, commercial property can deliver returns.

The announcement of the recent approval for a development in Buderim has given property investors and developers more confidence in the local property market. The development, for more than 1400 square metres of office space on King Street, represents the last remaining area of vacant land that adjoins Buderim Village Park on the busy street, according to Sunshine Coast Council councillor, Christian Dickson.

“Council received 56 submissions about the proposed development during the public notification stage of the assessment process – the overwhelming majority of submissions (54) were in support of the development,” Dickson said in a press statement from last week.

Sean Evans from SP Buderim said in the same release, “We’re ready to start construction as soon as the operational works is approved and that could be before the end of the year.”

Evans added that the top floor of the building is already tenanted with much interest from potential tenants. “I fully expect the building to be operational from 1 September 2014.

We know that property investors are returning to the residential market, but the news about this new development is a reminder to investors that it is not just residential dwellings that represent investment potential. Commercial properties are also popular among many seasoned investors. For the uninitiated, however, commercial investment might seem too daunting, so should you stick to residential, or give commercial investment a go?

There are advantages and disadvantages to both types of investment. The Sunshine Coast has always been viewed as fairly low risk for residential property investors (vacancy rates are usually low, even in lean times, and if you price your rent well and engage a good property manager, your investment should be vacant for no more than a few weeks between tenants).

Commercial, on the other hand, is seen as a higher risk. And this may be because most investors are much more familiar with residential than commercial opportunities. However, returns for commercial can often be greater – established wisdom tells us that residential returns are generally around three to five percent depending on the value of the investment. A quality commercial site can return as much as nine per cent.

When looking at commercial investment options, there are generally three types of properties an investor will consider: industrial buildings, such as sheds; a retail shop; and office space. Investors need to consider the risks and returns of each type to decide which one they are most comfortable with.

As the Coast’s population is growing at a faster rate than commercial land is created, it might seem to be an obvious investment strategy to go with commercial, especially considering the returns, however, commercial property investment is not for everyone – the biggest drawback of commercial property is that it can take much longer to find a tenant. As a result, investors need to have plans in place in case the property stands vacant for long periods.

If you are an investor who can put up only a small deposit and you don’t have a lot in reserve to cover the lean times, residential property is probably a much safer investment.

If, however, you shy away from investing in commercial property because you just don’t know much about it, it might be time to educate yourself. For those who can afford to invest their own capital into a property, commercial is worth considering.

(Highlight)

Any form of investment has tax implications and the Australian Tax Office recommends if you buy a commercial property, keep track of your records right from the start.

Any expenses incurred in the owning of the property – such as the interest on the loan and maintenance or repairs – are tax deductible, so keep thorough records of these.

Check with your accountant or solicitor about whether or not you will have to pay GST when buying a commercial property, and if you are eligible to claim that GST as a tax deduction.

My Weekly Preview, December 6, 2014

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Posted in Press Clippings