“I wanted a property that gave me a real positive cashflow – a cashflow that was significant after the outgoings got paid. I’m talking $500 or $1000 a week, an amount you could really use.”
This was Helen Tarrant’s big goal for investing in real estate – because she was busy working long hours in her business – she craves more lifestyle freedom.
Based on her research, commercial investing seemed to offer precisely that, so Helen started her search.
Switching from residential to commercial
With a portfolio of residential properties behind her, Helen was searching for her next investment – when she happened across a commercial strip in North Sydney.
With $500,000 to spend, Helen found her ideal premise in North Sydney. The property, 52m in size, was leased to a Japanese restaurant and nestled between a bustling Oporto and a busy café.
With tenants already secured on a long-term lease, Helen was sold.
The property was soon a part of her portfolio, earning her a 9% net return and giving her some solid cash flow after paying 5% interest on the mortgage.
Sky high cash flow of $22k annually – from one deal
Today, Helen’s commercial investment is still going strong. The Japanese restaurant has re-signed their lease and the property now delivers an annual positive cashflow of around $22,000 per year.
That’s pre-tax money in her pocket, after mortgage loan repayments and property expanse.
This massive cashflow is possible due to the unique structure of commercial investments, Helen explains.
While residential properties can sometimes enjoy steadier growth, commercial investments often offer a better rate of cash flow.
This is because landlords of residential premises have to pay several expenses (such as council taxes and
insurance) that reduce their net rent.
The bonus of commercial leases is that the tenant, not the landlord, often pays all these– which serves to boost your return by a huge margin.
Commercial leases also tend to be longer term, and tenants may add to the value of your property with any improvements or fitouts they add,” Helen says.
And of course, the rents are higher from the start – with yields ranging from 5%-11%.
Particularly in cities such as Sydney and Melbourne, where high residential prices are squeezing rental yields, investing in commercial property can be more affordable and profitable if cash flow is vital to your strategy.
Helen has enjoyed such strong results from her foray into commercial investing that she residential market and today, she teaches people about investing in commercial property and achieving sky-high positive returns.