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So why choose commercial property over residential?
Obviously this is the question every residential investor asks… whenever they are considering the transition across to commercial property.
However, you will quickly discover the reasons are rather compelling.
Reason #1: Your tenants stay for longer
For the most part, you find residential tenancies will be on a month-by-month basis… maybe 6 months, perhaps for a year if you’re lucky.
Whereas commercial leases will tend to range between 3 and 5 years - and it can often be for longer. That means you have fewer tenancy changes, and a far more predictable income stream.
Reason #2: You have greater control
When residential tenants wish to leave half-way through a lease, they simply need to find a suitable substitute tenant. And then, they will transfer the lease across to that person.
From there on, this new tenant becomes responsible for the rental, over the remainder of the lease term.
Whereas commercial tenants are running a business from your property. And whenever they sell their business, they also require your approval to “assign” the lease.
However, here’s the real difference: If the new commercial tenant defaults in paying the rental, you also have recourse to the previous tenant as well - because commercial leases are business contracts, enforceable by law.
Reason #3: You no longer need to pay the outgoings
Typically, residential properties will provide you with a 5% gross rental return.
From this, you need to pay the rates &amp; taxes, insurance, maintenance and so on — leaving you with about a 2.5% to 3% NET return, at the end of the year.
Depending upon what (and where) they are… commercial properties will generate a 5% to 9% NET rental return, each year.
And that’s because commercial tenants are also required to pay the various building outgoings on top of their rental - making this a true NET rental return for you.
Reason #4: Commercial tenants maintain your property
As you know, if the toilet stops working in an apartment … the tenant asks you to send around a plumber. Whereas commercial tenants quickly attend to (and pay to fix) the problem themselves - so as not to disrupt their business. 
Furthermore, the overall appearance of the property becomes a reflection on them. As such, your property is maintained in top condition … at their expense.
Therefore, whether the lease requires it or not … most commercial tenants will regularly repair and repaint the property, in order to maintain a good corporate image.
Reason #5: Greater regularity with rental payments
Most residential properties are rented by individuals. Therefore, the rent is often paid in cash, by personal cheque or by direct transfer. And this can often vary in its timing.
Because they are running a business, commercial tenants consider rent as simply another regular expense each month.
And generally, this gets set up as an automatic Periodic payment - and can be specified as such, within the lease.
Bottom Line: In essence, you find yourself having to deal with the vagaries of individual people… as a residential investor.
However, when you become a commercial investor… you start to enjoy a more predictable long-term relationship with your tenants - based upon a proper business footing.
Doesn’t that sound like a far better arrangement - particularly when you can purchase a small office for the same price as a two-bedroom apartment?
Chris Lang is an advisor to commercial property investors, sell-out author and regular speaker on how to invest in commercial property. You can contact Chris <a href="https://commercialpropertymadeeasy.com" target="_blank">here</a>.
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Why choose commercial property over residential? Chris Lang

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A detailed survey on the current state of the CBD Office markets by Jones Lang LaSalle was recently reported in the Australian Financial Review (16 July 2015). 
And as you can see from the table below, there are now significant disparities among the CBD Office markets around Australia.
<a href="/images/2015/08/06/CBD-Offices.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/08/06/CBD-Offices.jpg" alt="">
 
Although Brisbane, Perth and the Canberra each have (total) vacancy rates of 15% or more … there was a healthy 205,000 sqm of space taken up by Business  and Government nationally, during the past 12 months.
<h3>Rental Movements</h3>
Even so, you will notice rentals only rose in Sydney (+2.3%) and Melbourne (+5.2%) — where momentum and confidence have clearly now started to return.
Whereas, the other states have all shown a decline in their office rentals, as space requirements have contracted.
Sydney has been experiencing strong demand for A-grade space — where that vacancy rate has now fallen to 5.2%.
Likewise, Melbourne has seen a solid take-up. Although its vacancy rate rose marginally, to reflect the availability of some backfill space.
 Interestingly, there has been strong demand by smaller tenants seeking space under 1000 sqm.
The general consensus is that conditions will continue to improve through 2015-16; and the vacancy rates in the underperforming capital cities will hopefully stabilise.
CHRIS LANG is an advisor to commercial property investors, sell-out author and regular speaker on how to invest in commercial property. You can contact Chris <a href="https://commercialpropertymadeeasy.com/" target="_blank">here</a>.
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Significant disparities among the CBD office markets: Chris Lang

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It would be fair to say I’ve lost count of the number of times people ask me about the secrets for a successful negotiation.
Once you know how to negotiate… this will provide you with your ultimate passport to success.
You see, the success of every negotiation is based upon these elements. However, you also need to master various strategies, tactics and nuances… in order to truly become a master negotiator.
But the good news is… all of these are teachable skills — which you’re able to quickly and easily learn, with little or no effort.
Naturally, over a career of 40+ years… you tend to see and use virtually every negotiating technique there is. And one by one, I have tested them and noted down those that work.
Agendas
Everyone going into a negotiation will have an agenda. But the mistake most people make is in assuming that your agenda is the same as theirs.
You know, in all my years as a negotiator… I’ve never seen two identical agendas. Sure, there may be a few common items — but they never appear in the same order of importance, on both agendas.
As such, the No. 1 item on their agenda may well be No. 7 on yours. And the secret lies in uncovering just how to determine that… which is one of the other 25 techniques.
Because, once you know what’s on their Agenda … you are then in a far stronger position to trade your “lesser” items, on the way to achieving your ultimate objective.
In fact, the biggest mistake you can ever make is to allow your negotiation to reach the point where price becomes the only item under discussion. From there on, one party has to lose… in order for the other to win.
As you will soon realise, there are only four outcomes for every negotiation …
 
<img src="/images/2015/06/24/Neg-Chart.png" alt="">
 
Therefore, your aim ought be to take control of the negotiation and steer it towards a win-win result. That way, it ensures the deal will ‘stick’ … while the documentation is being prepared.
CHRIS LANG is an advisor to commercial property investors, sell-out author and regular speaker on how to invest in commercial property. You can contact Chris <a href="https://commercialpropertymadeeasy.com/" target="_blank">here</a>.
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The secret lies in discovering a hidden agenda: Chris Lang

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When you're just starting out, your main aim is probably just trying to secure a worthwhile property.
However, to be truly successful, you need to have a master plan.
 This may sound a little strange when you are only just about to buy the property. However, you should be looking forward and anticipating things like emerging trends; your lease expiry dates; changing economic circumstances; and the timing of any significant expenditure that will be required on the property down the track.
 You need to care, but not too much. In other words, never fall in love with the property. If circumstances change, then you need to be prepared to part with it – without having any remorse.
 Don’t look to "trade" commercial property in the same way you might do with shares.
When you make your initial assessment to purchase, always have a four-year time frame in mind.
 Many passive investors would prefer to buy a commercial property and then squirrel away the paperwork in their filing cabinets. But every four years you should carry out out a formal review of where your property sits within the marketplace. That won't necessarily mean you need to sell, but it could. What's important is for you to make a considered decision to hold the property for another four years, or sell it, if market conditions are right.
 With commercial property, things will change over time. A history of good performance in any one sector doesn't always mean that will continue. You need to understand how cycles vary for each of the sectors (office, retail, leisure and industrial).
 You'll discover ongoing improvement in value results from two key factors: regular increases in your net rental, and a fall in the capitalisation rate over time. Keep a close eye on things like a looming over-supply of space within that sector, interest rate movements (particularly for retail), and your current position within the growth cycle.
 Investing in commercial property isn't difficult, it simply requires a little forward thinking. And in much of that will come with experience. Alternatively, you can shorten that process by having a team of trusted consultants.
Chris Lang is a commercial property investor and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, <a target="_blank" title="Chris Lang's blog" href="https://his-best.biz/">his-best.biz</a>, which he updates regularly about the best way to get the most out of your commercial property investment. 
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Be a man or woman with a plan

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Investors have begun snaring some quality industrial properties, as rentals begin to climb following a reasonably static past five years.
<img src="/images/stories/lang-chart-cropped.jpg">
As you can see from the table, this increase in activity has been reflected in the dominance of developers bringing new stock onto the market.
Plus, you'll notice that private investors have emerged as the major category of buyers for industrial property.
The current wave of development is catering for a much larger office component, relative to what is normally provided by industrial developers. So much so, it is now often as high as 40% of the overall building area.
This trend is being driven by occupiers wanting to combine their administration building, in top-quality accommodation, with their distribution facility, rather than leasing an outer-lying warehouse, and having their head office in a more traditional office location.
The bottom line is: many of the larger developments are occurring by way of a fully-integrated business park environment, catering for small- to medium-sized businesses.
 And this is providing investors with the opportunity to acquire affordable industrial properties, surrounded by all the amenities needed by those tenants who occupy them.
Chris Lang is a commercial property investor and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, <a href="https://his-best.biz/" target="_blank" title="Chris Lang's blog">his-best.biz</a>, which he updates regularly about the best way to get the most out of your commercial property investment.
 
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Savvy investors cash in as industrial occupiers change tactics 

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Sometimes the best-looking property can be the worst real estate investment you've ever made. Remember that investing in commercial property is all about the price, the terms and the ongoing return on investment. Here are several tips for successful commercial property investing.
Be an investor – not merely an accumulator of commercial properties.
The reason you make investments is to produce a worthwhile profit. So if you end up buying a property that produces little or no growth, \you basically acquired a property (instead of making an investment).
Get yourself a mentor so you benefit from his or her experience.
Mentors can save you from making very costly mistakes, identify when you've missed due diligence items, and connect you with resources that you otherwise wouldn't have immediate access to.
Understand that every commercial property has a lifetime.
One of the biggest errors you can make as an investor is to ignore the fact you will need to spend money on the upkeep of the building over time. The building may need a new roof, or the electrical system may need to be upgraded. Every building goes through these renewal phases. Therefore, make sure you have a long-term strategy to handle such repairs.
Focus on one commercial property sector at a time.
Especially when you're starting out, you should focus on one type of investment: offices, shops, warehouses, or whatever you prefer. Each deal needs your undivided attention. It's much better to master one aspect than to be average over many. And who wants average-performing properties anyway?
Decide whether you and your assets are adequately protected.
As with anything in life, messy lawsuits can occasionally occur. Therefore, you need to do everything in your power to protect yourself and your investment. Ask yourself the following questions to determine whether you're fully covered:
How is your commercial property protected – both legally and insurance-wise?
Are your other investments totally separate from each other so one lawsuit can’t affect the other investments?
What do you have at stake, if you lose a lawsuit? Is your personal property, for example, your home, isolated?
Don't try to guess when it comes to the answers of these questions. Talk to a lawyer to ensure you're fully protected if ever you were to be sued.
For a partnership or syndicate, finance the deal using non-recourse finance. Non-recourse means you aren't personally guaranteeing the loan. This gives you two distinct advantages: it allows you to be taken off the loan if the partnership sour, and, if the property were to fail, the financier cannot come after you personally.
Once you understand the “rules of the game”, buying commercial property is really quite straightforward. You just need to do a little homework and make sure you get the right advice along the way.
Chris Lang is a commercial property investor and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, <a href="https://his-best.biz/" title="Chris Lang's blog" target="_blank" style="outline-style: none; outline-width: initial; outline-color: initial; text-decoration: underline; color: #6888b1;">his-best.biz</a>, which he updates regularly about the best way to get the most out of your commercial property investment.
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Five tried-and-true tips to help you profit from commercial property investing

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As we look back on 2011, Property Observer is republishing some of our most noteworthy observations of the year.
 
Baby boomers are facing an enormous challenge. And the sad fact is that they are probably not even aware of the problem.
You see, if they haven’t sold their traditional inner-suburban homes before 2012 they need to be prepared to hold onto them until 2025, because there simply won’t be a market for that type of property before then.
Unlike their parents, boomers will not wait until they are about to be carried out of their present homes before deciding to move. No, they see the next 20 to 30 years as a new chapter in their lives – where they'll want to downsize and start living for themselves.
Sure, they may need to crowbar the kids out first. Or maybe just move to an apartment or a townhouse with a couple of spare bedrooms.
Either way, they are about to start their decision process and will be doing it en masse. And therein lies the problem, when it comes to selling the traditional family home.
The problem is not that there will be any fewer buyers. Rather, that there will be about five times as many of these types of properties on the market over the next 12 to 15 years.
What exactly does this mean?
Despite residential property being currently on the doldrums, statistics tell us that about 60% of the average household wealth is tied up in your family home.
As such, the baby boomers’ equity is now at risk. And, potentially, this will affect them in one (or more) of three ways:
1. Those who have used their equity to finance pre-retirement property investments could well discover they actually have a negative equity in the family home.
2. They suddenly discover that the funding for their retirement plans could come up rather short.
3. The inheritance their children are expecting could be significantly reduced.
As you can appreciate, there could well be a number of people who might not be aware they have a problem, and may, quite unwittingly, are leaving themselves exposed.
Please understand that you're certainly not talking about "trophy" homes here. It is principally those three- to five-bedroom homes in the inner-middle suburbs of Brisbane, Sydney and Melbourne within the $1 million to $4 million price bracket.
These homes in some cases may have been last renovated 30 years ago, and now they represent mainly land value.
For Brisbane, this would involve suburbs like <a target="_blank" title="Bardon" href="https://www.urban.com.au/property-observer">Bardon</a>, <a target="_blank" title="Mount Coot-tha" href="https://www.urban.com.au/property-observer">Mount Coot-tha</a>, <a target="_blank" title="Stafford" href="https://www.urban.com.au/property-observer">Stafford</a>, <a target="_blank" title="Ascot" href="https://www.urban.com.au/property-observer">Ascot</a>, <a target="_blank" title="Mount Gravatt" href="https://www.urban.com.au/property-observer">Mount Gravatt</a> and <a target="_blank" title="Woolloongabba" href="https://www.urban.com.au/property-observer">Woolloongabba</a>.
For Sydney, it would include <a target="_blank" title="Mosman" href="https://www.urban.com.au/property-observer">Mosman</a>, <a target="_blank" title="Chatswood" href="https://www.urban.com.au/property-observer">Chatswood</a>, <a target="_blank" title="Roseville" href="https://www.urban.com.au/property-observer">Roseville</a>, <a target="_blank" title="Killara" href="https://www.urban.com.au/property-observer">Killara</a>, <a target="_blank" title="Gordon" href="https://www.urban.com.au/property-observer">Gordon</a>, <a target="_blank" title="Warawee" href="https://www.urban.com.au/property-observer">Warrawee </a>and Turramurra.
And for Melbourne, suburbs like <a target="_blank" title="Kew" href="https://www.urban.com.au/property-observer">Kew</a>, <a target="_blank" title="Camberwell" href="https://www.urban.com.au/property-observer">Camberwell</a>, <a target="_blank" title="Hawthorn" href="https://www.urban.com.au/property-observer">Hawthorn</a>, <a target="_blank" title="Armadale" href="https://www.urban.com.au/property-observer">Armadale</a>, <a target="_blank" title="Malvern" href="https://www.urban.com.au/property-observer">Malvern</a>, <a target="_blank" title="Malvern East" href="https://www.urban.com.au/property-observer">East Malvern</a>, <a target="_blank" title="Brighton" href="https://www.urban.com.au/property-observer">Brighton</a>, <a target="_blank" title="Elwood" href="https://www.urban.com.au/property-observer">Elwood</a> and <a target="_blank" title="Sandringham" href="https://www.urban.com.au/property-observer">Sandringham</a>.
Historically, your family home has been considered to be a de facto part of your superannuation. However, as a Baby Boomer that could well prove to be a myth — unless you make the move to downsize early, and beat the rush.
All the financial crisis has done is delay the start of this process a year or two, due to the general uncertainty.
As a general comment, during this period, the baby boomers will tend to live where they now holiday, and holiday where they now live. So in the city they will seek a scaled-down version of the level of comfort they now enjoy – preferably in the same neighbourhood.
The concept of a retirement village is not on their agenda, but the boomers haven’t really thought through their ongoing needs. Likewise, developers are not seriously addressing the key issues involved.
Unlike their parents, who generally left their downsizing until their frailest years, Baby Boomers will make their move while they are still fit. And they will probably not plan to move again.
The baby boomers’ relative fitness (or perhaps being in denial about growing old) that will cause them to choose their new home, while paying scant regard to becoming less mobile or becoming suddenly lonely when one partner dies.
Therefore, in order for their new downsized home to have enduring value, baby boomers need to pay close attention to both their physical and community needs.
While this may represent quite a challenge it also provides a fruitful niche market for the astute developer.
Chris Lang is an advisor to commercial property investors and gives keynote speeches and regular seminars on the best way to invest in commercial property. He maintains a blog, <a target="_blank" title="Chris Lang's blog" href="https://his-best.biz/">his-best.biz</a>, which he updates regularly about the best way to get the most out of your commercial property investment.
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Chris Lang

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