Investing in Commercial Property

commercial_property_investment_liverpool.jpgInvesting 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?

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8 Responses

  1. Shane says:

    My accountant has a number of residential properties. Her secret is to use a property management firm to deal with all the tenant stuff.

    They charge 5 to 6% and it takes all the hassle out of being the “landlord”

  2. Robin Bal says:

    Property management firms sure take away a lot of hassle.

    Thanks for your visit and comment.


  3. Jag says:

    Hi Robin,

    Land investing can be very lucrative, but it requires a lot of foresight to identify the potential of a particular plot of land, and there is a risk like you pointed out as it is very illiquid.

    Definitely, land investing will be one of the investment option I’ll always have in mind.

    Anyway have you heard of the Canadian-based Walton Landbanking? Heard many good things about it, but I have not personally invested in it.


  4. Robin Bal says:

    Hi Jag,

    I always advise that 30% of any investment portfolio should be in property, kind of balances out investment risk.

    I havnt heard of the Canadian-based Walton Landbanking, tell me more about it. Thanks.

    Cheers mate.

  5. Jag says:

    Hi Robin,

    A lot of Singaporean are investing in Walton Landbanking. In fact I went to their presentation once, and was pretty impressed. However since I’ve not done any follow up proper research or due diligence in this matter, I cannot say for sure if this is the real deal.

    You can check out their website at

    They serve clients in Asia, Germany, Canada and USA.

    The usual caveat emptor applies.


  6. Here in the US, property syndicates are called TICs (Tenants in common properties) and are only open to “accredited” investors (investors who earn over 200k/yr or are worth over $1 million) in order to “protect” them from financial loss(or maybe financial gain, I’m not sure!)

  7. Robin Bal says:

    Hi WBL,

    Thanks for your comment. I guess you can buy property funds like any other Equity Funds, the H.S.B.C US Property fund is a good fund I know of. A property fund is invested into many property syndicates or TICs.

    Take care and cheers

  1. August 5, 2010

    […] original post is here […]

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