What Are The Things to Consider When Buying Commercial Property?
Stepping in to commercial property
Most of us have experience with renting a residential property or buying a house or unit. Buying commercial property can be a little more intimidating as it involves a lot more considerations to look at, but nevertheless, buying one has increasingly become a valid investment option for a lot of Australians.
So, to remove the mystery and to familiarise you with the ins and outs of buying commercial property, let’s look at some of the main factors you should consider:
- Commercial property comes in three main types; office, retail and industrial.
- Commercial property has a higher return, but this comes at a higher risk.
- Commercial property leases are generally for a much longer period of time of around 5 years unlike residential ones that are typically around 12 months.
- In commercial properties the tenant usually pays most of the outgoings, such as council rates, insurance, repairs and maintenance.
- The lease is the most important document when it comes to profiting off a commercial property. Commercial leases are often 50 to 60 pages in length, and generally need a solicitor to draw them up.
- When you buy a commercial property it’s important to keep records right from the start because commercial properties used in the running of a business are subject to capital gains tax; plus you can also claim tax deductions for expenses associated with owning it, such as interest on a loan to buy the property and maintenance expenses.
- You may also be eligible to claim a credit for the GST included in the purchase price, or claim GST on other expenses that relate to buying the property. So keep records of your expenses from the start, so you can claim everything you’re entitled to.