You’re a hard worker who is moving towards retirement. You might have some residential property investments and some shares already so why consider investing in commercial property to help fund your retirement? If you own commercial property already, find out more about why this asset class wins for retirees.
9 reasons Mount Gambier commercial property is a great investment
1. Stable investment
Generally, commercial property is a more stable investment over the long term. As long as you have confidence in the business world, then you should be confident of investing in commercial property. And while market cycles mean that sometimes demand for commercial property drops off, you always have the opportunity for redeveloping or renovating a property to add value.
2. Long leases
Commercial leases by their nature are longer and more robust. This means you don’t need to worry about tenants leaving in the middle of the night or breaking their lease. Most leases require a substantial bond or a bank guarantee so you won’t lose rent whatever happens.
3. Higher rents and yields
Rent per square metre is higher for commercial property than for residential. While returns over the long term for commercial property might look similar to those for residential, the growth for commercial is generally in the form of rental growth rather than capital growth. As much as you might love residential property, unless you have at least five properties, you won’t get the retirement income you’re after.
4. More stable income stream
With long leases from three to ten years, and often built-in rent increases, your commercial property will yield a steady income for the term of the lease.
5. Defensive investment for retirement
While residential property investors are, in effect, gambling on higher property values, during their period of ownership they might need to accept a lower-than-market rent.
Commercial property rent levels are more predictable, owners can choose from a pool of high-quality tenants and even when there is an economic downturn, owners must be paid rent under the contractual obligations contained in the lease. Commercial property is thus regarded as being a defensive asset.
6. Lower maintenance and outgoings
Commercial leases fall into two categories: gross leases and net leases. Under a net lease (the more common type of lease contract), your tenant is obliged to pay for outgoings such as water rates, Council rates, management fees and more. Under a gross arrangement, all outgoings are calculated into the rent. However, rent increases may not cover the increases of individual outgoings eg. council rates increase by 12%.
7. Easier loan approval
Banks use different criteria when assessing clients for commercial property loans. You might even be able to secure a loan without using your income. As always, check with your mortgage broker or accountant before making any decisions.
8. Tax advantages for soon-to-be retirees
It is worthwhile seeking an accountant who has experience in superannuation and investment strategies. They can assist you with any tax advantages of investing in commercial property.
9. Easier resale in the current market
Commercial property is in high demand globally and Mount Gambier is no exception. If you’re holding an older commercial property and you’re ready to retire, you might consider selling at a good price now. It is likely that you would attract as good a price now as what you could potentially achieve in three to five years’ time.
Can we help with your Mount Gambier commercial property?
Call Herbert Commercial on 08 87 250 500 for a complimentary annual investment portfolio assessment. From this assessment, feedback may warrant the need to seek Herbert Commercial’s advice and expertise with formulating a plan to action restructuring or renegotiating the best lease scenario moving forward. We’re here to help.
As the only dedicated commercial property agency in Mount Gambier, we have a network with and are sought after by national commercial agencies as a trusted extension to their services. Our wealth of commercial knowledge of the Mount Gambier market extends to the broader commercial market, meaning we can ensure you achieve your commercial property goals.