Investing in commercial property is well beyond the financial means of most people. Few can afford the large sums of money involved in buying commercial real estate. For most of us our investment in real estate is limited to where we live – our home.
But unfortunately our home doesn’t generate any income or cash flow. In fact it probably costs us money in maintenance, rates and upkeep.
Sure the financial incentive to invest in your own home is to offset the cost of renting or the capital gains you get when you sell your house if its value has gone up.
Most financial advisors will tell you the best investment strategy is to pay off your home mortgage as quickly as possible to reduce your debt.
But what about after that if you want to invest in property? You have a choice – invest in another residential property or a commercial property.
Residential properties can often provide a good cash flow from rent, but there are associated hassles with getting good tenants, poor tenants trashing your property and the ongoing cost of maintenance. If you like playing the role of the landlord and being involved in all those activities great! But what if you want a hassle free commercial property professionally managed.
An increasingly popular investment amongst smaller investors and retirees is through syndicated property trusts. This is known as direct property investment where smaller investors buy small parcels of a larger property through a prospectus. These projects are managed and marketed by licensed property dealers.
Benefits for investors buying into property syndicates are they can purchase relatively small parcels, for example as little as $10,000 and gain exposure to the commercial property market.
There is also the added benefit of the commercial property market often being in negative correlation with the share market so investors can spread their risk across their portfolio.
Another benefit provided is the regular income provided by syndicated property trusts, high yields and relatively low risk.
The main objective is to invest in properties that have quality tenants, long-term leases, strong returns and good potential for capital growth.
The benefits of investing in a property syndicate are that it can enhance your lifestyle by providing a regular income; you can set and forget it.
“Ultimately, it’s all about income. The right property investment should provide you with more income, income that will enhance your lifestyle, either now or in the future.”
Property syndicates may not be for all investors but they do provide an option for diversifying your investment portfolio.
Remember this is a long-term investment, usually around 7 years. It is “illiquid”; meaning you can’t take your money out of the investment during this time. Identify investment syndicates with quality property in a good location with potential for capital growth. Ask for a copy of any independent investment and ratings reports. Analyze the lease arrangement. Ask how much rent or income will the property produce, what the income growth is and how long will this continue?