Many people shy away from investing in commercial property because they think it’s too risky.
But can renovating a commercial property make you more money than a residential renovation?
Renovating for Profit’s Cherie Barber says a commercial property investment and renovation can be extremely successful.
Barber experienced this success first-hand when she bought office space in the suburb of Balmain, roughly 6km from Sydney’s CBD.
She purchased it for for $1.8 million and renovated the space for $150,000.
“Keep in mind that commercial properties are bigger in area so it can cost you more to renovate,” Barber said.
The Balmain property is roughly 300 sqm, which Barber says is a safe size which can be easily rented to small to medium sized businesses.
Anything larger than that size can be risky, she says, as the target tenants would be large companies who would use the property less.
It is currently rented for around $15,300 per month.
“It’s a much higher rental return as opposed to a residential property.
“If I’d bought a residential property I would probably only get 2-3 per cent rental yield in this location. I’m getting double that rental yield with this particular property.”
Barber’s renovation included painting the property and taking out two large walls to create a large open plan space.
“I ripped up the old grungey carpet and put down a waterproof laminate floorboard throughout the property. That increased the sense of space.”
She also picked up an old concrete laundry sink for $150 to use as the kitchen sink which added to the industrial vibe of that building.
“With office spaces, you can get really creative and inject in your own personality,” she advised.
The Balmain property Barber bought for $1.8 million in early 2018 is now valued at $2.7 million.
“With an office lease, normally your tenant pays all of the mortgage cost and total rent. They pay the outgoings and land tax fee. It’s almost like a set and forget.”
Cheri Barber’s top tips for investing in and renovating a commercial property:
- Location is key
- Chose a tenant by industry
- Crunch the numbers and check yield returns
- Look for a strong lease
- Find ways to add value