Home Equity to Buy Commercial?
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What is the main topic discussed in this episode?
It's The Real Estate Podcast, brought to you by Ray White, the largest real estate and property group in Australasia. And welcome to another episode of The Real Estate Podcast, available on iHeartRadio, also on Spotify and Apple Podcasts, or wherever you get your podcast from. Well, it's a Thursday already, and it's the last day of March, the 31st today, tomorrow, 1st of April. And in a moment, we're going to be speaking with Scott O'Neill. He's back again from Rethink Investing.
What is the main question about using home equity to buy commercial property?
And one of the questions that we're going to be looking at this morning is, should you use the equity of your home to purchase a commercial property? But first we better have a look at the main centre forecast. And in Sydney expecting showers with windy conditions and 22 degrees today. Melbourne showers clearing with 21. Brisbane partly cloudy with 29 degrees. And in Perth expecting a high of 31 with possible showers and maybe even a storm today. Let's Talk Commercial, a podcast series with Scott O'Neill. Yes, it's time for our podcast series with our resident commercial property expert, Scott O'Neill from Rethink Investing. Good morning, Scott. Good morning, Craig. Good to be back. How fast a fortnight rolls around, eh?
Yeah, it does. It does. Things are going crazy in 2022. It's a very fast moving year, lots of ups and downs already for the world, but crazy times. And Scott, if people are going to look at purchasing a commercial property, there are many different price points based on someone's budget and what they might be looking at. And as a starting point perhaps scott we can look at what some of the price points are and some of the best deals to consider yes craig this is one of the most common questions i get asked and it's really around what is the minimum amount that's one of the common ones so starting with the minimum amount you need for a good commercial property I generally say around 200, maybe even 250 grand cash or equity.
And look, you can buy properties with a lot less, but remember you put a 30% debt deposit down on a property. So once you factor in 30% deposit plus stamp duty and solicitor costs, building and pest costs, and just general purchasing costs, you're probably looking around a $600,000 purchase. That is generally a capital city property. You'll be able to get into the warehousing market, small shop front type stuff. But I generally find warehouse purchases are the best bang for buck in that price point. You are dealing with potentially a logistics or a storage related tenant, which is quite good in the post-COVID or current COVID world, whatever you want to call it. And yeah, so that's a good option. In terms of if you're lucky enough to have a larger budget, you might decide on what
should I buy? If you've got, hypothetically speaking, millions of dollars to spend, sometimes it's worth spreading it around a few different properties or purchasing one. But I'll give you a real overall viewpoint of the market. So generally purchasing under a million dollars for a commercial property, there's a lot of competition. There's a lot of buyers in that price point. So it's quite competitive. You might find the yields are a bit tighter because of that extra competition. From $1 to $2 million in this market is quite similar, but you're starting to deal with larger type tenancies, maybe multiple income assets, freehold versus strata. So there's obviously benefits to spending more money. Once you get over $2 million, almost that $2 to $10 million range, I call that almost the quiet zone of the property market.
There's less competition. syndicates generally play over $10 million. So there's, I guess, a lot less competition from those types of guys. But yeah, if you're lucky enough to have a larger budget, you will be able to play in that quiet zone of the market, which is generally multi-tenant, large freehold sites, very good quality deals. So dollar for dollar, that's some of the best deals you'll ever find in that range. Just coming back to that lower end, you mentioned warehouse.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:02–0:35
2
What is the main question about using home equity to buy commercial property?
0:35–8:48
3
What are the different price points for purchasing commercial properties?
8:48–9:59
4
How much equity do you need to invest in commercial real estate?
9:59–10:40
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