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  1. #1

    Default Commercial Property vs Blocks of Units

    I went to a property investor association meeting last night about commercial property and the benefits as well as the downsides of it all.

    I've hence spent around 2 hours on trademe looking for all sorts of commercial property around the 300k-1million purchase price mark and what value you can get for money.

    Looks like you can get 9-11% yield in smaller towns, hard to re-let, short lease properties all the way down to 5-6% yield stronger tenants, stronger lease, easier to re-let properties.

    I then looked at what you can buy in blocks of units/flats for similar prices and you can buy anywhere from 2x2 bedroom units to 6x1 bedroom unit blocks with yields around the 6-7% mark in large-ish towns/cities around NZ.

    Question is... Why take the risk of commercial property with potentially vacant buildings, complexities with lending, etc when I could go out and buy a good value unit block I can add value to in a good location for similar yields with arguably better upside for capital growth longer term?

  2. #2
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    7,999

    Default

    Good question indeed.

    You used to be able to buy most commercial properties on a 10% yield or so.

    But then it was 8, then 7, then 6, now 5 and 4.

    All to do with all the money sloshing around the world looking for a home I reckon.
    Squadly dinky do!

  3. #3
    Join Date
    Feb 2015
    Posts
    317

    Default

    RTA changes and all that , many are thinking leaving the biased world of politicking.
    which leads some to commercial but high amount of investor interest from offshore parties .. has certainly seen the yields driven down.
    One advantage is you do not have to do the RTA-like changes the tenant does/

    The other option for those with smaller funds
    https://www.nzherald.co.nz/property/...ectid=12121342

  4. #4

    Default

    I have kept current properties, but started working in overseas market while Taxcinda and Twitford decide how many landlords she will bankrupt and tenants they will make homeless in the course of their vision of a "fairer" NZ.

  5. #5
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,451

    Default

    Big difference is who pays for costs.

    If you are saying 6-7% return for block of flats, I presume you mean Gross Yield. So then less rates, insurance and repairs!

    Whereas commercial in general the tenant pays these (depends on tenancy agreement)

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.

  6. #6

    Default

    With blocks of flats you usually maintain the outside garden spaces and you also need to keep fittings etc up to scratch. I had a block of 4 units once, good cashflow in the end but every month there was a bill for some kind of R&M.
    Free online Property Investment Course from iFindProperty, a residential investment property agency.

  7. #7

    Default

    Quote Originally Posted by Bluecoat View Post
    The other option for those with smaller funds
    https://www.nzherald.co.nz/property/...ectid=12121342
    Noticed the article talks about the "build to rent Sector" flourishing in the UK and USA, and starting to gain traction in OZ.
    https://www.afr.com/real-estate/buil...0180702-h125nn

    Whats the viability of projects like those here? Would it work in NZ?

  8. #8
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    7,999

    Default

    Quote Originally Posted by AlexL View Post
    Noticed the article talks about the "build to rent Sector" flourishing in the UK and USA, and starting to gain traction in OZ.
    https://www.afr.com/real-estate/buil...0180702-h125nn

    Whats the viability of projects like those here? Would it work in NZ?
    If you're a masochist, it'd be great fun.
    Squadly dinky do!


 

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