commercial property

Commercial Property as an investment for a Self Managed Super Fund

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There are several types of commercial property from SMSF investment perspective. The usual distinctions are industrial, commercial (as in: office space), retail. These are still relevant for SMSFs, but a sub-type should be added: ‘owner occupied’. For doctors it would mostly be either commercial or retail, few would set up a surgery in a converted warehouse.....Doctors also have an option for residential/professional, but that doesn’t affect the SMSF investing case.

What distinguishes commercial property from residential (other than the usually much larger amounts involved) are the investment returns and volatility. Commercial property tends to generate a much higher rental return than residential: typically between 6 and 9% rather than 2 to 5%. There is a reason for that: volatility. Whilst the rental returns are high when leased, vacancy rates are potentially a lot higher. Empty industrial sites, shops and offices abound and a vacancy can last many months or even years, no matter by how much you reduce the rent (or increase the ‘incentives’). Read Moreā€¦