When Australians think about investing, the conversation almost always starts with residential property or shares.
Commercial property rarely gets mentioned.
In fact, unless you own a business or know someone who’s invested in commercial real estate, it’s probably never crossed your mind.
That was exactly the conversation we had on this episode of Dollars & Distractions.
Not because we think commercial property is better than residential property but because we believe people should know all of the options available before deciding which investment strategy is right for them.
Why Don’t More Australians Invest in Commercial Property?
One of the biggest reasons is simple:
Most people don’t know it’s an option.
We’re taught from a young age that buying a home is the Australian dream. Then, once you’ve bought your home, the next step is often an investment property.
Commercial property isn’t part of that conversation.
Even within the finance industry, residential and commercial lending are often treated as completely separate worlds. Unless someone specifically asks about commercial finance, many people never get exposed to it.
Do You Need Millions of Dollars to Buy Commercial Property?
This is probably the biggest misconception.
Many people assume commercial property is only for large corporations or wealthy investors with millions sitting in the bank.
That simply isn’t always the case.
Like residential investing, there are commercial properties at many different price points. The right purchase depends on your financial position, borrowing capacity and long-term goals.
The important thing is understanding what’s available rather than ruling it out before you’ve explored your options.
The Advantages of Commercial Property Investing
Every investment has pros and cons, but there are several reasons investors are becoming increasingly interested in commercial property.
Longer Lease Terms
Residential tenants may stay for six or twelve months before renewing.
Commercial tenants often sign much longer leases because relocating a business can be expensive and disruptive.
Moving equipment, updating marketing material, changing Google Business listings and fitting out a new premises all take time and money.
For many businesses, staying put simply makes sense.
Tenants Often Pay the Outgoings
One of the biggest differences between commercial and residential property is who pays the ongoing expenses.
In many commercial leases, the tenant contributes to outgoings such as:
- Council rates
- Water charges
- Building insurance
- Body corporate fees (where applicable)
This can create a very different cash flow position compared to residential property investing.
It Could Diversify Your Investment Portfolio
Many Australians naturally think:
- Buy a home.
- Buy an investment property.
- Buy another investment property.
Commercial property simply provides another option.
For some investors, diversification across different property types may suit their long-term strategy.
The important thing is understanding all of your choices before making a decision.
The Challenges of Commercial Property Investing
Commercial property isn’t perfect.
Like every investment, it comes with risks.
Vacancies Can Last Longer
One of the biggest differences is tenant demand.
Residential properties often attract multiple applicants quickly.
Commercial properties can take longer to lease because you’re waiting for the right business to come along.
That means investors need to ensure they have enough financial capacity to cover repayments while the property is vacant.
Higher Setup Costs
Commercial purchases can involve additional costs compared with residential property.
Depending on the transaction, you may require:
- Commercial legal advice
- Accountant assistance
- Business guarantees
- More specialised lending structures
Having the right professionals involved becomes even more important.
Can You Buy Commercial Property Using an SMSF?
Another topic gaining attention is purchasing commercial property through a Self Managed Super Fund (SMSF).
While this strategy certainly isn’t suitable for everyone, it can be worth exploring with your accountant and financial adviser.
One point we discussed is that recent changes affecting residential borrowing inside SMSFs have prompted more conversations around commercial property instead.
If you’re considering this strategy, professional advice is essential before making any decisions.
Can You Use Equity in Your Home?
Yes depending on your circumstances.
Some lenders allow borrowers to use equity in their residential property to help purchase commercial property.
Every lender has different policies and every situation is unique, which is why obtaining advice before committing to a purchase is so important.
Build the Right Team
One of the biggest takeaways from this conversation was that commercial property isn’t something you should navigate alone.
The right team may include:
- A mortgage broker experienced in commercial lending
- A commercial solicitor
- An accountant
- A financial adviser
- A buyer’s agent
Each professional plays a different role in helping you make informed decisions and avoid costly mistakes.
Is Commercial Property Right for You?
There isn’t a single “best” investment.
Residential property might suit one person.
Commercial property may suit another.
The goal isn’t to convince everyone to buy commercial property.
It’s simply to encourage people to understand the different opportunities available before deciding what fits their financial goals.
Sometimes the best investment strategy starts with asking questions you didn’t even know to ask.
If you’ve been thinking about growing your wealth, don’t limit yourself to only considering residential property or shares. Learn about all of your options, seek professional advice and build a team that can help you make informed decisions.
Because the more you know, the better financial decisions you can make.
Listen to the Full Episode
If you’d like to hear the full conversation—including our own experiences investing in commercial property listen to this episode of Dollars & Distractions wherever you get your podcasts, or watch it on YouTube.
We’d love to hear your thoughts.
Have you ever considered commercial property investing or want to know more? Reach out here