Can Someone Teach me the Basics of Commercial Property?

[ENP]

I understand what you are asking and wonder ....
To provide an intelligent answer to you by me or anyone else you have to say why you are asking.
Like are you saying to yourself can I make more money doing commercial.

I'm asking because I want to learn as much as I can regarding different investments. I also see commerical has higher yields.

Longer term, I would like to own a few commercial properties so just want to learn the ropes.

[Social_Media_NZT]

"I'll buy you lunch"................


I love it. Good on you for making such a great offer to lure in any possible mentors.................

[ben9465]

I guess it was part luck, part research , part skill. I looked all over NZ at industrial properties read all the books etc. It is very rare to find a small investment with a tenant like I had. In fact when I was looking nothing even came close to that. Lease terms too were generally all 3x3x3. Which meant that tenants had 3 years tied in then they could either leave or renew for another 3 years. Not very good for the landlord when rents were static. I don't think the banks were too keen to lend on such short lease terms either particularly to people with low net assets. I think my property was far from typical and most of the other industrial units available at the time would have performed far worse. I think today the situation is harder still as rent yields are lower. When I bought it was during a period of low demand for commercial investment property, and consequently better yields. It takes more research, be prepared to look at all growing cities in NZ and be very selective particularly as to tenants.

[Rosco]

Hi ENP,

From all the comments above, you can see that everyone has there different ideas that work for them.

I actually agree with a few of Davo's comments, I just see them as related to the tenant not the building. ie buiding that has multiple tenants (I think everyone agrees this reduces risk), a building that is suitable for a variety of tenants.

Also commercial is a lot harder than residential. In some cases it works great and with no hassles, but there is also landlords who have had tenants go bust and then been vacant for years. Residential is easier, as you can generally always get a tenant.

Ross

[Glenn]

I'm asking because I want to learn as much as I can regarding different investments. I also see commerical has higher yields.

Longer term, I would like to own a few commercial properties so just want to learn the ropes.

Right on. I can see where you are coming from. As you can see we all have different ideas and different outcomes.
Frankly whilst I admire Ben's skill on picking one only and coming out on top the general theory is you need several to spread the risk. A lot more so than residential. Also remember usually over the years commercial finance is harder to get (you will have to think about why that is) and is at a higher interest rate. Actually as you get on it gets lower but early days there are always hurdles. Having greater hurdles like LVR (now that is a modern popular term) and higher interest rates means that the perceived higher returns you crave for actually do nothing for you until you are well into your life as an investor and managed to push your LVR right down to below 40%. In hind sight I think I would have done way better if I had invested initially in more houses and less commercial. I have doubled some money on residential and tripled some on commercial.
When I think about it the main reason anyone should get into commercial should be because you want to play with bigger numbers. Obviously you can do the very same thing (like bigger numbers) with blocks of flats. In fact banks usually regard blocks as commercial.
Just remember the industry and even the Government regard investors of commercial property as needing less consumer protection than buyers of residential. That blood filled world encourages the sharks to swim where the good food is.

[Davo36]

ENP, I learned about comercial property through becoming a commercial property agent. Did it for 4 years, learned all the ins and outs of leases etc. Learned what properties lease well, which ones that don't etc.

If you really wanted to learn about it, that would be the way to go.

But like residential investing, a lot of it is down to luck and timing. No one can really predict capital gains or rent increases.

[Wayne]

ENP, I learned about comercial property through becoming a commercial property agent. Did it for 4 years, learned all the ins and outs of leases etc. Learned what properties lease well, which ones that don't etc.

If you really wanted to learn about it, that would be the way to go.

But like residential investing, a lot of it is down to luck and timing. No one can really predict capital gains or rent increases.

now that would be the way to go.
The problem I have is two fold
- I don't understand what tenants are looking for
- I don't know what the going rate really is so how far to push the negotiation.
I found out in the weekend a pretty run down property at the back of mine leases for more - an eye opener.

[Wayne]

Residential is easy - lots of statistics and comparisons to know what the rent etc should be.
Commercial is a totally differant ball game.
Can be very interesting if you don't get stressed easily but try having no income from a property for 18mths - and your costs go up as you have to pay the outgoings like rates and insurance.

[Glenn]

But like residential investing, a lot of it is down to luck and timing. No one can really predict capital gains or rent increases.

Really! You have given me something to think about.
I thought all the wonderful increases of rent and capital was as a result of my great skill.
And I thought all the commercial tenancies that turned bad, vacancies and the low capital growth were caused by my bad luck.

Yes it is all like fishing. Sometimes you get great fish and next time at the same spot all I get is carpet sharks.
If I gave up when the good fish were not biting I would never have a chance to enjoy myself.

[nick_pv]

There is a great book by empower education you can buy for around $30 which would teach you all the basics and more. Good read and its less then lunch and more then what you would learn in an hour chat with someone.

I can vouch for this, I read it over the Christmas break. It was really good.

[nick_pv]

I love the idea of becoming a commercial agent for a while. I'd also be keen to invest in a group with someone who has done this before.

[DaveW]

I love the idea of becoming a commercial agent for a while. I'd also be keen to invest in a group with someone who has done this before.

hi Nick, Feel free to send me a private message with your contact details. I have purchased commercial property with a group before and I will look to do another one this year if the right property comes along.

[tulips]

Re - Commercial Real Estate Investors Guide

Recently read it, had some good advice. Disappointed in the second to last chapter
Streetwise Commercial Tips - couple of really unhanded ideas to acquire a perceived
advantage. I like to live my life by Gandhi's quote - If you want the world to change
you must be the change.

[Davo36]

tulips, yes, well business and Ghandi's way of living will probably never be the same thing.

I think living a decent life is more important than ripping off some old person (for instance) to make a bit more money.

But there are plenty around (and some on here) who will do anything for a buck. Illegal alterations, unconsented addition of bedrooms, all the various rent by the room schemes and so on.

[tulips]

Good on ya Dave

As Buddha said - "Those that hate will never be free of hate"