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Commercial Property the King of Cashflow

March 13, 20232 min read

The King of Cashflow

Commercial property, is the king of cashflow positive property investment.

For me, without a doubt it sits right on the top.

For most, it’s the scary beast in the property investment cupboard that they know nothing about.

It’s like commercial agents are speaking another language, cap rates, triple net leases, gross yield, net yield.

This is where the opportunity begins. Most people are focusing on bricks and mortar residential assets, leaving space and opportunity in the commercial world.

Though this is changing at a fast rate as people are cottoning onto the high rental yields and long long leases offered by this asset class.

Let’s look at some example numbers:

Commercial Warehouse:

Location: South East QLD

Lease: 5 years

Purchase price: $750,000

Loan $525,000 (70% LVR)

Interest rate: 3.5%

Net Yield: 7.2%

Passive income after all loan repayments: $27,750/yr or $533/wk clear in your pocket.

Why I like commercial property:

  • Tenant pays ALL outgoings - rates, body corp and sometimes your management fees.

  • Tenant pays for maintenance on your property.

  • Long leases around 3 to 5 years and 10-20 years in the higher value properties.

  • Opportunity to find strong international tenants with high financial backing

  • Rental increases are built into the lease

  • Capital growth increases with the rental increases

  • Support’s our borrowing capacity which is an essential part of creating a diverse investment portfolio

What’s not to like about it?

Well, with everything there is risk.

  • Vacancies can be long. We allow up 3 to 6 months for a vacancy. But our cash buffer (funded by tenant rent) and asset selection should minimise the impact of this risk.

  • Leases can be complicated. This is why we use the best lawyers to review our leases and advise us of any risk.

  • ‍Capital growth can be slower. Commercial property is an income play, we enter this asset class to help boost cashflow in our portfolio and support our borrowing capacity. Any capital growth is a bonus!

  • ‍Changes in infrastructure and government policy. Any change in policy may affect the demand of on asset. This is why we avoid certain asset classes ie. petrol stations, which are extremely lucrative but we believe aren’t an entirely safe future proof asset.

If you are interested in supercharging your passive income,

Book a chat with me on our website!

The Founder and Director of Rise Property Buyers, passionate property investor and lifestyle designer.

Adam Nyeholt

The Founder and Director of Rise Property Buyers, passionate property investor and lifestyle designer.

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© copyright - Rise Property Buyers - 2023

© copyright - Rise Property Buyers - 2023