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HOW MUCH RENT IS RIGHT FOR YOUR COMMERCIAL PROPERTY INVESTMENT?
In Sydney, it’s quite common for a commercial investment to attract between 5% and 6.5% net rental yield, compared to between 2-3.5% for residential. However, to get the best return possible, it’s essential to get the balance right when setting your rental rate.
Charge too much, and your property may sit vacant for an extended period of time, leaving you to cover the costs until you can find a suitable tenant. Charge too little, and you risk devaluing your property over time by lowering the rental yield.
Here’s how to get the balance right:
1) Research the market
Use an online property portal such as commercialrealestate.com.au or realcommercial.com.au to do some research on similar properties in the area. Once you have a suitable list of comparisons, you’ll be on your way to determining a price that will offset your costs and attract the right long-term tenant.
2) Consider your value-adds
What your space can offer a prospective tenant can really boost its overall appeal and may influence the price that they are willing to pay. Some attractive features may include:
- Polished hardwood floors
- Natural light
- Exposed brick or timber beams
- Period features
- Amenities, such as exclusive use of a kitchen or bathroom
- End-of-trip facilities
- Central location or excellent visibility from the street
- Signage options
- Additional storage
Be aware that even relatively inexpensive cosmetic improvements like a new lick of paint or new floor coverings may increase your property’s rental value. So, consider whether these are worth the investment before going to market.
3) Work with an agent
With so many great online resources out there, it’s only natural to be left wondering whether there’s a need to consult an agent at all.
However, the reality of it is that the property market is a complicated game – value fluctuates, and there is no such thing as a straight-forward leasing agreement. (Doing all the legwork yourself is also a significant time investment.)
Commercial agents bring a wealth of market knowledge and industry experience, are seasoned negotiators, and understand the rules and regulations around commercial leasing. They will advise on current rental trends for your type of property and location, and help you set a rental rate that will strike the right balance between attracting the right long-term tenant and maximising ROI.
Speak to the experts
With in-depth market knowledge and years of industry experience, our TGC leasing agents can guide you through the real estate process, striving to achieve the best possible rental price, in the shortest possible time.
Get in touch with TGC today to discover how our experience and market expertise can help you maximise the value of your investment property.