Commercial SMSF Investing: 3 Major Mistakes First-Time Investors Make

Commercial Property Investment These days, commercial properties have been a more promising form of investment compared to residential pieces of real estate. No thanks to the overstocking of rentable dwellings and lack of adequate increase in wage, the rental markets inside and outside capital cities are experiencing the inevitable absence of growth.

On the other hand, the commercial scene has remained strong due to the developments left and right. Especially if you’re working with a real estate company that has an eye for opportunistic investments in the country, you might receive better returns than expected.

But that doesn’t happen by accident. And without avoiding these traps, no first-time commercial SMSF property investor could succeed:

Failing to Attract Tenants

Just because you’re property is the prettiest in town it doesn’t mean it guarantees tenancy all year long. For many reasons, you might suffer a low occupancy rate and shoulder heavy pressure on your cash flow most of the time.

Be it a bad location or an unreasonable rent, it’s hard to lure a tenant without doing your research intensively.

Letting Emotions Take Control of the Purchase

Many Australians fall into the trap of thinking that the act of investing in real estate would automatically generate returns. In reality, the result is the opposite if you use your heart rather than your head in decision-making.

You can never measure the marketability of a commercial property based on its fully furnished space or its arresting kerb appeal alone. You need to cover all the bases and recognise its possible disadvantages to target the right tenants.

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Taking the Repair and Renovation Costs for Granted

Not all commercial properties are turnkey investments. You can’t always find all the issues with space on the first inspection. As a result, you might have to spend a little on repairs and renovations just to get it ready for renting. To be safe, keep about 10% to 15% of your overall budget to cover such costs.

No investor would admit their forecast is incorrect until they’re proven wrong by the market. In most cases, you’d need professional advice to identify all possible risks and calculate them properly.