Real Estate Investment Real Estate Investing Guide for Beginners in Newca | Page 9

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Tips for commercial property Newcastle investment
Are you thinking of investing in commercial property Newcastle? Or do you want to know
what attracts someone to invest in commercial property?
Commercial property Newcastle investment isn’t always riskier than residential investment
and it can provide more cash flow. Adding commercial property to a portfolio can be a good
way of diversifying your investment.
Each investment decision is different but based on my 30 years commercial property
experience; here are my five key steps to get you started.
Get a great tenant and a strong lease
One of the cornerstones of a commercial investment is a great tenant. That tenant pays their
rent on time, looks after your property and is on a lease with good terms. A great tenant to
have is a bank or a strong national or multinational company; someone who is stable and has
capacity to pay. A tenant that is just starting a business may be more of a risk because a high
proportion of small businesses fail in the first year.
Know how to price a commercial property Newcastle
Commercial property prices are determined by two main factors.
Current Net Rental Income (Net Income) is basically the cash left over after property expenses
(council and water rates, insurance, land tax and repairs) are paid but before interest is
deducted (excluding any GST).
Rents are typically expressed in terms of rate per square metre. Generally, it’s the net rent
per annum (p.a) divided by the internal size of the shop or office. Use the rent per sqm p.a for
comparisons to other properties.
Market Yield (Yield) is a moving figure. The yield percentage is a reflection of the risk you take
purchasing the property. The higher the risk the higher the yield. A bank deposit is virtually
risk free and the interest rate or yield you get is about 2%. Commercial property has more risk
and currently yields around 6.6% for a good property (down from 7.9% in 2012).