Hidden benefits of new savvy investment trend
Commercial spaces are becoming the new savvy investment with high returns and other hidden benefits.
Broker and founder of Complete Financial Management Athena Zotos said she was surprised by the recent sharp interest in commercial properties from clients.
“With commercial, your rental return can be a lot higher and your outgoings are covered,” she said.
“Tenants pay for everything including bills, fixtures, and rent prices have increased so its an attractive proposal.
“Some (buyers) are using their super funds … others are choosing to buy so they don’t have to rent for their own businesses,” she said.
“One of the biggest drawcards is that in some states you don’t have to pay stamp duty on commercial properties.”
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Athena Zotos.
Experts revealed that stamp duty was one of the biggest hurdles when it came to purchasing property. In NSW on a $1 million property, stamp duty would cost owners a hefty $40,000 fee at the time of purchase.
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Victoria and South Australia had no stamp or transfer duty on commercial and industrial properties.
In the ACT, commercial properties up to the value of $1.9m also had no stamp duty, saving owners thousands of dollars to use for a deposit.
Ms Zotos said the most popular spaces for investors were warehouses or offices.
“You don’t want to buy a specialised space because then you’re restricted with who you can lend to,” she said.
“Warehouses are becoming popular because people have wholesale companies where they need the storage and space to move trucks in and out.”
Experts are seeing a sharp rise in commercial property investment.
Sailendra Kundrapu has run his practice ‘My Physio My Health’ for 17 years.
As his business has grown to 12 locations across Adelaide, he has begun to purchase commercial properties to run his practice out of.
“In the last few years as we began to expand I realised the value in purchasing,” he said.
“Some landlords were unreasonable, our rent was increasing by 300 per cent. The cost is more upfront, but over time it can be less expensive than leasing.”
Using the equity of the property, Mr Kundrapu said it was better for business with tax benefits, and said owning the property allowed him more flexibility in customising the space to their preference.
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Sailendra Kundrapu.
“When you lease you can only get a minimum 3-10 years lease, when you own you have more of that stability,” he said.
Now he owns four commercial properties and is hoping to continue to expand.
“Once the business is stable in that area, we try to purchase,” he said.
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Dr Vivek Eranki, CEO of Cosmetique had also transitioned to purchasing commercial properties for his business as well as investment purposes.
“We understand what makes a good healthcare property, it needs to have certain frontage and car parks available,” he said. “If it’s too specialised, it does make it hard to find a new tenant.”
Cosmetique CEO Dr Vivek Eranki.
He looked for properties with good rental yield and was drawn to the benefit of tenants paying for their own outgoings.
“We look for areas local governments are putting substantial investment into other projects that may encourage population growth,” he said.
“For ensuring longevity of the company, acquiring property has been a really good manoeuvre.”
