Five misconceptions about investing in commercial property: Chris Lang

Here are several common misconceptions I frequently hear when people are looking to embark upon commercial property investing.

1. Securing commercial properties using the internet is easy.

There are some people starting out in who feel they don't need any professional help with this. But finding a suitable property is only half the task.

The other half involves properly assessing the property — both physically and financially. Then you have to package up the deal that's best for you.

And this is where having a top consulting team (for the property, legal, finance & construction aspects) is worth its weight in gold.

2. Residential investors will find it a difficult transition.

Fundamentally, this stems from insufficient knowledge and, therefore, proper understanding. And again, that's where your consulting team also comes in.

Some of my most successful clients have been those with little or no prior involvement with commercial property. However, they were clear thinkers; and could quickly absorb and assess the advice being given to them.

3. You need loads of cash.

Again, this is simply not true.

Sure, many commercial properties may sell for millions of dollars. However, you can also buy well-leased strata office suites for between $350,000 and $500,000, which is more or less the same price you would be paying for an apartment.

And yet, your net return from one of these office suites is around 7.25% per annum, compared with a 3.5% net return for apartments. So, I'll leave you to do the maths!

4. Commercial tenants are difficult to deal with.

Because commercial tenants are running a business from your property, they have a vested interest to keep it looking presentable.

Besides, their lease will require them to undertake (and pay for) any required maintenance. And when the time comes for them to leave, there is also a clause requiring them to "make good" beforehand.

5. It's harder and more expensive to manage commercial property.

If you choose to manage the property yourself, then you may well run into some costly problems. But that's the very reason why you would engage a competent managing agent.

And unlike residential property (with management fees of 7%), your fees for commercial property will generally range from 3% to 5% of monies collected — depending upon the size of the property involved.

Bottom line: Hopefully, this brief overview has helped dispel some of the common myths surrounding commercial property.

There is nothing overly complicated about commercial property — you simply need to treat it like any other business deal, and do a little homework first. And when you are receiving net yields of 7%+ per annum … you can quickly appreciate why the rewards are worthwhile.

Chris Lang is an advisor to commercial property investors, sell-out author and regular speaker on how to invest in commercial property. You can visit his website Property Edge Australia to help you get the most out of your commercial property investing.