Why commercial property is more accessible than you think

When the Australian Financial Review writes a story on a 47-year-old single mother’s journey to a comfortable retirement, all thanks to commercial real estate investment, you know the days of commercial real estate being an elite-only investment are numbered.

After her divorce, Sarah Chehab, a self-employed pharmacist, accepted that her retirement fund was far too low to achieve a comfortable retirement. Her residential investment property in Sydney was rising in value but its cash flow was too weak to sustain her needs.

And then, something incredible happened…

She sold up, leveraged the expertise of an experienced commercial property buyer, invested in two commercial properties (a supermarket in NSW and a warehouse in QLD) and watched her passive income skyrocket.

A comfortable retirement is now in her sights. She’s not a property tycoon, not a mining mogul, not a high net worth investor… She’s someone that many Australians could relate to, in terms of financial position and her desire for a well-funded retirement. The major catalyst for her ideal retirement becoming a reality is her transition into commercial real estate investment.

Commercial real estate as an investment

While residential property is a great starting point for Australians—with its prospect for capital growth and its tax benefits—commercial property is a gem for those wishing to boost their cash flow, in a reliable and secure way.

Considerable yields

Known for excellent cash flow opportunities, commercial real estate can provide solid returns of anywhere between 5 per cent and 8 per cent per annum (and even higher with a well-selected asset).

On the other hand, residential properties will typically generate yields of only 2 per cent to 3 per cent—far lower than most term deposit rates, these days. Most of that cash flow can be eroded by loan expenses and property outgoings. It’s really the capital growth element that attracts so many investors.

But for many, cash flow is the key to the perfect retirement. When the ability to earn from a career role decreases, the reliance on passive income only increases… In comes commercial real estate.

A shield from inflation

Commercial real estate combats inflation through regular (typically annual) rent escalations. These might be aligned to a specific percentage or an index, like the Consumer Price Index (CPI).

A documented increase in rental income each year helps defends a commercial asset’s cash flow from inflation.

Outgoings are taken care of

Earlier, we mentioned outgoings in residential properties. A residential tenant will not be expected to cover the costs of a new lick of paint, a blocked toilet or shower drain, a broken air conditioner or the price tags for any major repairs to the property they occupy. These expenses are the landlord’s responsibility.

But for commercial real estate, these improvements and repairs are taken care of by the tenant. As long as the property is occupied—and the lease agreement caters to this (as is usually the case)—any maintenance items, refurbishments and the like are the responsibility of the occupant.

Capital growth opportunities

While residential property typically gets the limelight for its value increase capabilities, many investors forget that there is significant opportunity for capital appreciation in commercial real estate.

Buying with the intention to add or restore value to an established property can have incredible outcomes for an investor’s capital investment. We’ve experienced this ourselves time and time again, providing investors with a total return of up to 100 per cent for some investments. (Author’s note: Of course, there’s never a guarantee of repeating this in any future investment.)

How can you invest in commercial real estate in 2024?

As today’s heading suggests, commercial real estate is an investment that’s far more accessible than the average Australian might expect. You can thank the growing range of investment funds and expert property investment companies for this.

Unlisted property trusts allow investors to participate in high-price tag commercial real estate, by pooling together funds of like-minded investors and acquiring property in a Unit Trust. A Unit Trust is one of the most tax-efficient vehicles for property investment, allowing investors to own a portion of the subject asset, while sharing both returns and tax deductible elements.

The entry price for investors can be anywhere from a minimum of $10,000 to $250,000. The higher the minimum entry point, the higher the total property is likely to be. Those who are pouring a greater volume of funds into such unlisted property trust investments are perhaps more inclined to be treated as an individual, because—naturally—there are probably far fewer investors on board for that one investment.

Sarah Chehab is just one example of how an Australian with a vision of prosperity made her dreams come true. There’s no guarantee that her success will happen to you via a commercial real estate investment, nor is there any certainty an unlisted property trust is the right investment. But it’s another investment avenue that Australians can add to their list of options.

And—as we know from years of investment experience—being aware of the options available to you can be the first step towards real estate success.

Interested in adding a future-proof, secure and stable investment to your portfolio? Get in touch with us today about our upcoming commercial property investment opportunities or subscribe for investment updates. 

We open several unlisted property trusts throughout the year and we are always welcoming new investors to join us on the journey to prosperity through strategically-purchased commercial property.