A beginner's guide to investing in commercial properties in Canberra

Being the proud owner of a commercial investment property can be an equally exciting and rewarding experience, but there are a few tips and tricks that go into deciding if it’s the right move for you.

The possibility of high-income potential and tax benefits from commercial real estate need to be weighed up in collaboration with other factors.

First things first

A bit of self-reflection and self-education is the top tip from Clarity Home Loans managing director Mark Edlund, who says there is a variety of resources that can help anyone looking into commercial real estate.

“There are podcasts and books that talk about investing in property, which is a good first step,” he says.

“Then we will also recommend talking to a broker who will have quite detailed investment knowledge and advice on how to structure the debts, and the returns, and educate you on how negative gearing works.”

Finding the right property

Once you have decided that you want to invest in commercial property, the education doesn’t end there.

Next, it’s important to know what sort of property will be best suited for your situation. Edlund says there are multiple factors that need to be considered when making this decision.

“You have industrial, retail and office space when it comes to commercial investments, so depending on the segment that you want to enter, you need a clear understanding of what the market is, or what the appetite is like for those properties,” he says.

“As an example, there can be a high vacancy rate for office spaces in Canberra, so you would need to consider that factor.”

Marketing your property and finding the right tenant

When it comes to any type of investment property, it pays to have the professionals handle it – whether it be managing tenants or marketing the property correctly from the very beginning.

Kenneth Kong, head of marketing and sales at TP Dynamics, says that deciding on your target market informs how you sell it to a potential tenant.

“Like anything, you want to think about putting your best foot forward and showing the best features of the property, the facilities and the option of parking and public transport in the area,” he says.

“Then you want to think about what sort of tenant is going to be suitable, so if there is like already a cafe within the complex, we don’t want to put another cafe there because you want the businesses to complement each other.”

The other thing to consider when finding the right tenant is how long you want them there.

Ideally, any investor wants long-term tenants, but it is important to think about flexibility when signing a tenancy contract.

The not-so-hidden costs

They might not be hidden, but there are costs associated with commercial investments, and it’s important to have a steady cash flow to support them.

Potential costs include:

• Loss of rent from a lengthy vacancy period between tenants
• Incentives for tenants, such as rent-free periods
• Building upgrades of commercial properties to comply with BCA standards
• Capital gains tax

All in all, investing in commercial real estate can be very rewarding, but doing your homework and relying on professionals can make all the difference.