Property investment is a great way for you to secure your assets, diversify your portfolio, create a passive stream of income and reap numerous tax benefits that come along with it. The problem, however, lies in the fact that before you decide to buy a property, you need to do a bit of research on the topic. For instance, the investment property, in general, can be divided into two major categories – residential and commercial. Even these two categories have their own sub-categories. For instance, commercial property can be divided into retail, leisure, healthcare and industrial property. Here’s something that all Australian property investors need to know about buying industrial property.
What is industrial property?
The term industrial property can be quite broad and it mostly includes venues like warehouses, factories and similar establishments. The general division speaks of six different types of industry-related property types. Here, you have warehouse and distribution centres, manufacturing buildings, cold storage buildings, telecom and data hosting centres, R&D buildings and showrooms. As you can see, the type of property determines both your tenant pool, your returns and even the type of infrastructure that you have to establish in order to buy an industrial property.
The type of income
The next thing you need to understand is the fact that each of these venues requires a particular type of investment in order to be managed. Which brings us to the question of whether it’s all worth it. If you decide to rent out a commercial property, you get to reap about 4 to 5 per cent of its total value on a yearly basis. This is in opposition to the residential property one per cent rule. However, when it comes to industrial property, you need to bear in mind that renting out the entire space to a single client can be just one of the options that you have. For instance, in the warehouse industry, you can rent out your services (with or without your involvement as a manager), thus opting for a greater or lower profit rate.
The importance of professional help
One of the biggest problems with understanding the industrial property is the fact that doing the research on the neighbourhood isn’t as simple as with a residential home. It’s not like you can just check the crime rate in the area and see if there are some parks and schools nearby. The necessary infrastructure is more complex; the industrial property is more expensive and it’s substantially harder to factor in all of this without previous experience in the field.
To make things worse, ownership transfer isn’t as simple either, seeing as how you’re not always doing with a single owner (which is often the case with residential property). All in all, this is why you may need some specialized local aid. For instance, when looking to buy industrial property in Sydney, what you need are NSW-based property advisors and buyers’ agents. This way, you get the assistance from real estate professionals that have an in-depth knowledge of the local market.
When it comes to the risk associated with buying an industrial property… well, first of all, you need to understand that it’s a bigger investment. That means that you’re putting more investment money at stake. However, unlike with residential property, the competition is not that tough, which means that it’s substantially easier to find a suitable tenant. One more thing worth keeping in mind, nonetheless, is the fact that, for the same amount of money, you can purchase several residential properties or a single industrial property. Depending on a number of tenants definitely sounds less risky than depending on one major client.
In the end, this is still a real estate investment. This means that cost-effectiveness depends on so many different factors. The idea itself is not good or bad, it’s the quality of the property that makes all the difference. So, the sooner you start with your research, the better the outcome you can hope to get. Also, the inclusion of professionals in your decision-making process can help mitigate some of the most dangerous risks that you’re bound to face. All in all, you have so many options.
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