Now is one of the best times in the past 20 years to buy commercial property, with the pandemic giving an insight into the most resilient types of tenants and properties to invest in.
James Dawson of Commercial Investing Academy says eight months into the pandemic it is now an opportunity to look back and see what sorts of commercial properties worked well and maintained their value during the pandemic.
“If you are an investor now is the time to start refocusing and moving forward,” Dawson says. “The fundamentals of Australia’s property market I feel are really good.”
He says it is time to refocus and look at properties with tenants in them that have survived or even thrived during the past eight months.
“I would recommend that if you’re looking to invest, don’t sit on your hands, get stuck into it, get some knowledge together and start looking around because it could be one of the best times in the past 20 years to buy property.”
Dawson advises looking for cashflow positive commercial assets which will allow owners to build a buffer for any future economic crisis.
He says the commercial market is really starting to heat up with a recent auction event with multiple properties achieving a 90% clearance rate and sales totalling $33 million.
There are still plenty of good buys to be found and little competition as only about 10% of property investors look at commercial assets.
Dawson says the basic rule of commercial investing is to buy in the right location and you wouldn’t go astray basing yourself near where the big operators like McDonalds, Aldi and KFC set up shop, as they spend a lot of money on market research before committing to an area.
The types of tenants who have emerged as less of a risk during the pandemic are essential service providers like doctors and medical centres, small suburban retail centres and small suburban offices or industrial tenancies.
“There are many different types of properties to get into, but obviously you need to do your basic due diligence and focus on the tenant to see how they are going,” Dawson says.
This means walking around the street, speaking to people on the ground, including agents, and looking at the expert research.
“With all investments the aim really is to get pretty much bullet-proof rental incomes from your property – and I think that is absolutely achievable from this style of investing.
“One of the most basic positives really with commercial property is that you can get genuine positive cash flow. You can build a buffer and then you are going to put yourself in a great position moving forward with your investment if something does happen.”
Dawson says with record low interest rates it is an ideal time to consider commercial property.
“You can buy high cash-flow properties and if you choose correctly you are going to get the capital growth and stability as well – and fantastic tax benefits and a tangible physical investment.
“If you buy something that’s cash-flow positive you can actually take your profit as a monthly income rather than wait for five or ten years to get a higher valuation.”
Dawson says those investors who believe there is no capital growth to be had with commercial properties are mistaken.
The value will grow if you select the right property in the right location – and particularly one which has the potential to add value expanding it or renovating.