Commercial vs Residential

[donna]

Hi All,

Keen to get your thoughts on Commercial Property investment in NZ. To date residential has been the focus for me but the more I read about successful investors the more I believe commercial is the bigger revenue earner. What's your thoughts, experiences?

Many thanks,

Donna

[captain_kirk]

Commercial

Donna,

I have recently purchased a commercial property in Auckland - three tenants included. Positive cashflow plus one tenant spent over $100k on fitout improving the value of the property.

Key is to buy well located property where there should always be a ready tenant. (by shopping malls, retail precinct) Also 2-3 tenants is good as then you are covering your risk somewhat. (diversification of income)
Also key is to add value where possible (preferably at tenants cost!) and to long lease terms with regular reviews. By adding value you could consider a change in use (e.g. add an apartment to top floor where zoning allows).

Key risk is vacancy factor - soon becomes an 'alligator' if no tenant for six months or more! Residential should always attract a tenant even if you have to lower rents.



"Live long and prosper, Spock."