How much do I need to invest in commercial property?

Commercial real estate is known for being the investment of the elite. With price tags for a high-quality commercial asset rarely dropping below the million-dollar mark, many uninitiated will fob off the investment avenue as being too expensive to partake in. But is that necessarily so? How much do you need to invest in commercial property?

The answer depends: Are you going in alone? Or would you consider investing in a commercial property syndicate (also known as an unlisted property trust)?

How much to invest alone?

Big league property investments will typically cost upwards of $5 million. But many are able to find smaller commercial property investments for the price of a modest home, starting from around the $500,000 mark.

To know how much you’ll need to purchase a commercial real estate asset as a solo investor, you need to consider the bank’s involvement.

For a commercial property, the bank will typically throw in a maximum of 60 per cent to 70 per cent of the property value. You’ll need to put up $300,000 to $400,000 of your own funds while the bank will take care of the rest for a $1 million purchase. Keep in mind you might wish to reduce your borrowing amount, if your budget allows, to take a greater piece of the pie and see a larger equity footprint on your investment.

Regardless of the borrowing amount, the above scenario doesn’t take into account the many acquisition costs involved before the property is yours.

These costs include:

• Stamp duty and transfer
• Lodgement fee
• Valuation costs (ordered by the bank; paid by you)
• Legal and settlement
• Technical due diligence

And finally, it doesn’t include the amount you need for a reserve fund – your monetary safety net should unexpected capex requirements appear during your property’s lifetime. There is no magical number for your reserve fund, but your due diligence, the most crucial part of the acquisition journey, should give you a reasonable idea of the future costs required to keep your investment running smoothly.

How much do you need to invest in a property syndicate?

Engaging a property investment company and investing in a commercial asset in a syndicate has become extremely popular for both time-poor Australians and those who can’t put up the funds to own a commercial property on their own.

The minimum amount of money to invest in a commercial property syndicate in Australia can be anywhere between $10,000 and $250,000.

If the minimum investment amount is only modest, say between $10,000 and $50,000, then you can expect you’ll be investing alongside many other investors. Yes, the barrier to entry is low, but you won’t have the one-on-one treatment offered by syndicates with larger minimum investment amounts.

Investing in a property syndicate with a larger minimum investment amount – $250,000, for example – means you’ll be treated far more exclusively. Expect to receive a good amount of communication from the trust manager for these premium syndicates. It’s the first-class service you’ve paid for after all.

Want to know the return you can expect when investing in commercial real estate? Find out what’s considered a good return in commercial property investment here. 

We’ve mentioned that investors in syndicates are typically short of time or funds, and so look to unlisted property trusts as their avenue for commercial real estate investment. But another league of investors place their capital with syndicators because there is usually a history of performance that exceeds their own investment ability.

A commercial property investment group lives and breathes property, meaning their time is spent either with an ear to the ground searching for the next champagne investment opportunity or ensuring their investors’ commercial property investment is performing strongly.

If you think the hassles, costs, and complexes of commercial property investment aren’t for you, then perhaps consider investing in a commercial property syndicate.

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