Commercial vs Residential Property
Join Managing Director Steven Goakes as he compares commercial and residential property investments, highlighting the unique advantages and considerations of each to guide your investment strategy.
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Managing Director Steven Goakes delves into the fundamental differences between commercial and residential property investments. He outlines the potential benefits and challenges associated with each, providing a comprehensive overview to assist investors in determining the best fit for their financial goals and risk tolerance.
Whether you’re seeking higher rental yields and longer lease terms typical of commercial properties or the stability and familiarity of residential investments, understanding these distinctions is crucial. Watch to gain clarity on which investment path aligns with your objectives.
Steven brings a wealth of experience to Natgen and our clients. His 30 year career has focused on commercial real estate, funds management, compliance, corporate governance and law.
With a masters degree in property and trust law and a business degree, since 1998 Steven has been structuring and operating manage investment funds to maximise returns to stakeholders. Success in this area has come through critical analysis of organisational and stakeholder needs, and focusing management effort in those areas which add investor value.
Steven has managed investment assets in excess of $1 billion and has personally overseen the purchase and investment of a further $1 billion of commercial properties and participated in (and advised on) joint-venture developments totalling over $400 million in gross realisation.
Beyond his professional activities, Steven is also actively involved in mentoring business professionals for organisations within Australia & abroad.
Steven is a responsible manager under the Group’s AFSL.
Another differential with the residential market is that the return profile is quite different. So in a res, when you have a residential investment property, you’re often only netting a couple of percent return over time.
Once you’ve paid all your costs, a gross return of 5% per annum is unusual these days. It’s usually less than that. Take all the costs out and you’re down in the very low single figures.
Commercial properties tend to return more than that because of the nature of the tenants and the specificity of the use of them as well.
So we can see we’re purchasing properties at the moment with net returns of sort of 6–7%, and that’s translating into a return within our trusts in the 8 to 9% range.
And that’s pretty durable as well because we’ve got long leases, so you don’t have any of the trouble with tenants moving out every 6 or 12 months.
The state in which properties are returned to us is typically substantially better because we’ve got professional tenants as opposed to individuals.
And we can put similar tenants back into those sorts of places, typically with minimal capital expenditure to do so.
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