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THE RUNDOWN

Is this commercial real estate investment worth it?


First: find the yield: Take the rental rate and then subtract all the outgoings, including rates, body corporate, taxes. Then divide the net rent by the purchase price to work out the net return. Location, the type of property, and type of tenant are the main determinants of yield. Location: Look at the neighbors, determine foot traffic, find out if the area is growing, changing, or in decline. Type of property: good results come from versatility. For example, small tilt slab warehouses can accommodate office space, distribution center, or even dance school. Tenant: Long-term tenants give the best yield, and are worth waiting for.