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Investing In Commercial Property
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 it's 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. The prospectus is lodged with the Australian Securities and Investment Commission and the property and syndicate is professionally managed. As of December 1999 there were 77 Property Syndicates operating in Australia with more than $1.45 billion invested. Nearly 60 per cent of these investments use borrowed money, known as "gearing". The benefits for investors buying into property syndicates is 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. A typical breakdown of a property syndicate is the property management company buys a commercial building ranging from between $10 to $30 million and then they market this to around 300 individual investors who each have an equity subscription of between $40,000 and $50,000 each. Simon Toovey is the Managing Director of Glenmont Properties a Perth-based property syndicate. He says their 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," he said. Toovey gives the example of a typical investor profile of someone looking for secure, regular income rather than capital growth. 'The most important aspects are location, lease, tenant and management. It's no good having a lease when the tenant holding that lease is a $2 company. Ideally the tenant is either a government department or a major, "blue chip" corporation," he said. "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. Ten Tips for First Time Property Syndicate Investors 1. Set your objectives and work out a budget for how much you want to invest. 2. Understand the risk/reward tradeoff. The higher the return the higher the risk. Aim for syndicates with a return of between 8 and 10 per cent. 3. Understand the risks of property syndicates. These are a potentially unfavorable market when selling, rising interest rates, member liabilities and future potential tax changes. 4. 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. 5. 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. 6. 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? Thomas Murrell MBA CSP is an international business speaker, consultant and award-winning broadcaster. Media Motivators is his regular electronic magazine read by 7,000 professionals in 15 different countries. You can subscribe by visiting http://www.8mmedia.com. Thomas can be contacted directly at +6189388 6888 and is available to speak to your conference, seminar or event. Visit Tom's blog at http://www.8mmedia.blogspot.com.
MORE RESOURCES: London Ontario Real Estate Information Can I Sell My Private Mortgage Notes? MISSISSAUGA, ONTARIO-- - Chartwell Seniors Housing Real Estate Investment Trust announced today that Bristal Holdings, LLC, a company jointly owned by Chartwell and affiliates of ING Real Estate Australia Pty has entered into an agreement to sell a portfolio of five seniors living communities comprising ... BTB Real Estate Investment Trust announces the acquisition of an office building in Ottawa, Ontario TORONTO, ONTARIO-- - Simon Property Group, Inc. , the world's leading retail real estate company, Calloway Real Estate Investment Trust and SmartCentres announced plans to develop their second Premium Outlet Center in Canada. The center will be located in the Town of Mirabel, Quebec, approximately 20 ... TORONTO, ONTARIO-- - Calloway Real Estate Investment Trust is pleased to report strong results for the first quarter ended March 31, 2012.Highlights:--  Maintained portfolio occupancy rate at the 99.0% level for the ninth    sequential quarter. --  Funds from operations  increased by 14.4% to $54.6 million and    5.1% to $0.434 on a per unit basis compared to the same period in 2011 ... TORONTO , May 17, 2012 /CNW/ - The Ontario Real Estate Association (OREA) applauds proposed legislation introduced today at Queen's Park that, if passed, would facilitate the use of electronic agreements ... TORONTO, ONTARIO-- - Allied Properties REIT today announced results for its first quarter ended March 31, 2012. The results are summarized below and compared to the same quarter in 2011: Q1 2012 Q1 2011 ... TORONTO, ONTARIO-- - Allied Properties REIT announced today that the Trustees of the REIT have declared a distribution of $0.11 per unit for the month of May, 2012, representing $1.32 per unit on an annualized basis. The distribution will be payable on June 15, 2012, to unitholders of record as at May ... TORONTO, ONTARIO-- - Allied Properties REIT announced today that it has entered into an agreement to purchase the following property for $61.75 million:  Address                               Total    Office   Retail   Parking                                            GLA       GLA      GLA    Spaces  ----------------------------------------------------------------------------  Lang Tannery ... TORONTO, ONTARIO-- - InnVest Real Estate Investment Trust announced today that a distribution of $0.0333 per stapled unit, payable on June 15, 2012, has been declared to the holders of record as at the close of business May 31, 2012. The distribution is $0.0333 per unit of InnVest Real Estate Investment ... TORONTO, ONTARIO-- - RioCan Real Estate Investment Trust today announced a distribution of 11.5 cents per unit for the month of May. The distribution will be payable on June 7, 2012 to unitholders of record ... |
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REAL ESTATE ARTICLES
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