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The Mercury Real Estate Guide : May 15th 2009
60—MERCURY Friday, May 15, 2009 FINANCE AND CONVEYANCING Getting down to business MUCH has been written about residential proper- ty investment but com- mercial property is rela- tively unknown to some property investors. Most investors feel comfortable with invest- ing in residential proper- ty as they are familiar with it — whether it is a house, unit or apartment. Many people also have had to rent a property at some stage so have some knowledge of residential property investment from the tenant’s perspective. Commercial property, on the other hand, is not as well known. If you do not deal with the day-to- day matters of running a business from a commer- cial building, most people are unfamiliar with the terms and conditions of commercial leases, GST implications and who is responsible for the out- goings (expenses) of the building. to the world of commer- cial Here is a brief insight (non-residential) property investment. Commercial property comes in three main forms—office, retail and industrial property. Investing in commer- cial property is quite dif- ferent from investing in Property expert Peter Koulizos offersaguide to investing in commercial property. residential property. Return Residential property in- vestment is relatively low-risk and, as a conse- quence, gives low re- turns. Commercial prop- erty has a higher return but this comes at a higher risk. For example, a flat or unit will average a return of 5 per cent, whereas industrial prop- erty, such as a ware- house, may average 8 per cent. Risk The higher risk comes in the form of higher vacancy rates. Let’s use the warehouse example. It could take a while to find a new tenant for the warehouse,manymonths and perhaps a year. Con- versely, finding a new tenant for your residen- tial property will take only a week or two. Duration of leases Residential leases tend to be for six or 12 months. However, commercial Conveyancing Solutions For experienced, friendly and professional service, and for your peace of mind contact: Alex Saunders Conveyancing Paralegal 6223 8899 firstname.lastname@example.org property leases are gener- ally for a much longer time. It is not uncommon to have leases that are for an initial five-year period, with the option to renew for another five years. Quality of tenant The tenant is obviously a crucial part of your property investment. In commercial property, a government or large cor- porate tenant is consid- ered a blue-chip tenant. They are likely to rent your property for a long time and are unlikely to default on the rent. Economic performance As in any form of prop- erty investment, the econ- omyis vital to your finan- cial health. At the moment, with consumer and business confidence at all-time lows, many businesses are having to close. If your building has one of these businesses as a sole tenant, you could face some very hard times. On the other hand, residential property is fairly resilient when it comes to the economy. The worst that may hap- pen is that it takes an extra week or two to find a tenant or you may have to drop your asking rent by $5 or $10 per week. High cost of entry Buying commercial property is often much more expensive than buy- ing residential property. CBD office or retail space is generally the most ex- THE OFFICE: Commercial tenants look after maintenance themselves. pensive space, due to its locality. Industrial prop- erty on the outskirts of the city can also be expen- sive, because it can be a large property. Costs, however, can minimised by purchasing smaller, strata-title premises. Maintenance costs Upgrading a residential property is relatively cheap. A paint job, new floor coverings, kitchen and bathroom can cost as little as $20,000 to $30,000. Refurbishing a com- mercial building, how- ever, can be a very costly exercise. New air- conditioning, upgrading the building to meet new health and safety stan- ‘ 133 Macquarie St Hobart www.pwl.com.au at home finance Fresh Housing Loans is a fresh approach to financing your new residence or even refi nancing your existing home. Owner-occupier home loans Investment property loans Refi nancing/debt consolidation Self-employed applicants Credit-impaired applicants For professional service and quick approvals call Cameron Dick today! Mobile 0417 369 915 Phone 6213 3318 Fax 6234 5171 Email email@example.com 15 Warwick Street Hobart www.fresh-finance.com.au MERCURY MORTGAGE WATCH Standard Institution AMP ANZ Aussie B&E Ltd Citibank Commonwealth Bank CUA HomeSide Lending ING DIRECT mecu Members Equity Bank MyLoan MyWay MyRate NAB Nationwide Mortgage one direct QuickDirect RESI Mortgage Corporation St. George Bank Suncorp Phone 1300 306 716 133 535 132 221 133 282 132464 13 30 30 13 13 14 131 333 Intro rate 4.99f Westpac Banking Corporation (02) 9265 1700 1800 289 691 1300 79 69 80 136 126 13 33 30 13 11 55 132 032 1300 721 240 1300 663 558 13 13 12 1800 133 464 132 888 13 15 63 4.61v 4.99v 4.79f - - - - - 4.65v 4.57v - - 4.55 4.66 5.79f - 5.17f - - - Intro Term 12 12 12 12 - - - - - 12 12 - - 12 12 12 - 12 - - - Variable Rate 5.89 5.81 5.55 5.67 5.99 5.64 5.52 5.47 5.09 5.45 5.39 5.06 5.03 5.74 5.50 5.04 5.10 5.62 5.79 5.80 5.81 Equity rate - 5.96 5.44 - 6.36 5.74 5.77 5.95 5.69 5.55 - 5.60 5.50 5.22 5.60 5.23 - Home 5.59 5.89 5.80 5.96 5.45 5.59 6.09 5.79 5.39 4.75 4.99 5.39 5.19 5.85 5.15 4.83 5.09 5.84 4.99 4.85 5.95 5.34 5.79 5.39 In commercial property, a government or large corporate tenant is considered a blue-chip tenant. dards and refits can cost tens and sometimes hun- dreds of thousands of dol- ’ lars. However, the costs are rarely borne by the owner. Outgoings One of the advantages of being an owner of commercial property is the tenant usually pays most of the outgoings, such as council rates, in- surance, repairs and maintenance. This means that most of the rent collected by the owner is able to be kept, whereas with residential property the owner uses the rent money to pay for rates, taxes, maintenance and repairs. All the details of who pays the outgoings, how much rent is owed, how Peter Koulizos is a univer- sity lecturer and author often it is increased is outlined in the lease. The lease This is the most impor- tant document in relation to commercial property. Unlike a residential lease, which is commonly a standard document and about four pages long, commercial leases are often 50 to 60 pages in length, are not standard documents and generally need a solicitor to draw them up. Read the lease carefully and if you are unsure of anything, ask a legal professional to ex- plain it to you. Fixed Rates 1 Yr Term 5.49 3 Yr Term 6.19 6.19 6.19 6.39 6.39 6.19 5.99 5.44 5.89 5.59 6.15 6.15 6.03 5.49 6.56 6.09 6.05 6.67 5.69 6.39 5.79 5 Yr Term 6.99 6.84 6.79 7.04 6.89 6.84 6.59 6.29 6.69 - Application Fee $545-895 $600-675 $250-649 $795 $600 $0-650 $600 6.75 7.15 6.68 6.29 6.91 6.79 6.70 7.02 6.34 6.99 6.39 $300-600 $220-719 $595 - $0-395 - $100-800 $600 $600 $0-633 $600 $710 $310 - The introductory rate reverts to the standard variable rate after the initail term f = fixed Source: www.infochoice.com.au c = capped take a fresh look 1106a
May 8th 2009
May 22nd 2009