7 Essential Considerations for First-Time Commercial Property Investors

Investing in commercial property can be a rewarding venture, but it requires careful planning and consideration, especially for first-time investors. Below are essential tips and information for aspiring commercial property investors in South Australia. By understanding the key factors involved in commercial property investment, you can make informed decisions and set yourself up for success.

  1. Determine Your Budget and Financial Goals:

Setting a realistic budget aligned with your means is crucial before diving into commercial property investment. Consider the loan terms and deposit requirements based on your financial capabilities, typically commercial acquisitions require higher security and/or deposits. It’s also essential to prioritise other financial goals before committing to an investment. Assessing your financial position will help you make sound investment decisions.

  1. Understand Upfront and Ongoing Costs:

Investing in commercial property involves various upfront and ongoing costs that need to be factored into your financial planning. Upfront costs include the deposit, loan application fees, lender’s mortgage insurance (if applicable), government charges, legal and conveyancing costs, and inspection fees. Ongoing costs encompass loan repayments, interest charges, strata fees, council rates, insurance, maintenance costs, and property management fees. Upstream Property offers comprehensive property management services to assist with day-to-day operations and tenant management.

  1. Research Potential Investment Locations:

Conduct thorough research to identify suitable locations for commercial property investment in South Australia. Explore suburbs where properties are performing and are part of a cluster of commercial properties and have the potential for price growth. Consider nearby proposed developments that could positively impact property values. Additionally, evaluate the availability of local amenities such as cafes, shopping centres and transportation options to attract tenants and ensure long-term demand for your property.

  1. Credit Report Assessment:

Before starting your property search, it’s essential to review your credit report, this can be done via a finance broker or direct by yourself. A tarnished credit history can negatively impact your loan approval chances. By addressing any issues or discrepancies, you can improve your credit standing and increase the likelihood of securing financing for your commercial property investment.

  1. Property Management Considerations:

Managing a commercial property can be time-consuming and requires expertise, especially if you have other commitments or are located far away. Engaging a professional property manager can alleviate the burden and ensure efficient operations. Upstream Property offers reliable property management services, including tenant screening, rent collection, maintenance and repair coordination, and routine inspections. Their experienced team can handle the day-to-day tasks, allowing you to focus on maximising your investment returns.

  1. Familiarise Yourself with Legal Obligations:

As a landlord, it’s crucial to understand your legal obligations. Familiarise yourself with the specific responsibilities that apply to landlords in South Australia ie Local Legislation including Retail & Commercial Leases Act. Stay informed about tenancy agreements, bond management, and dispute resolution processes Eg Land Tax can not be passed onto tenants to pay in some circumstances… Refer to the appropriate state government or Fair Trading website for comprehensive information on landlord obligations in South Australia.

  1. Explore Tax Deductions and Implications:

Commercial property investment offers potential tax deductions that can reduce your overall tax liability. Good property managers keep meticulous records of expenses related to the property, including property management fees, loan interest charges, council rates, repairs and maintenance costs, and insurance premiums. Consult with a tax professional to ensure you claim all eligible deductions and understand the tax implications, including negative gearing and capital gains tax. Also note in South Australia there is no stamp duty on Commercial Purchases and depending on the type of property GST may not be payable on the purchase price.

Entering the world of commercial property investment in South Australia requires careful consideration of financial, legal, and operational aspects. By establishing a realistic budget, conducting thorough research, and seeking professional guidance, you can navigate the process successfully. With Upstream Property’s strategic advice and property management services and a sound understanding of your legal obligations and tax implications, you can confidently embark on your commercial property investment journey.