Is commercial the answer?
Tuesday 23 October 2018
Investors dreaming of financial freedom should look to commercial property, argues Jeff Brill who is the author of New Zealand’s first book on commercial property investment since the GFC.
The population of New Zealand is, according to Statistics NZ, growing to the tune of one extra person every five minutes and 55 seconds.
This is calculated considering one birth every eight minutes, one death every 14 minutes and one immigrant being granted NZ Residency every eight minutes.
Property prices are climbing out of reach, the Government is reducing incentives for local private investment to help supply and a new Overseas Investment Act is arriving soon.
Alongside all that, teachers and nurses are striking for more pay and it is more common to see both partners in the work force to help make ends meet.
With little time to look after those that need us, child care and retirement villages are flourishing around the country and one can’t help but look to the future to see where we are all headed.
With home ownership rates the lowest in 66 years (Statistics NZ) it looks like we are heading towards a “rental economy”.
This makes one wonder where all the superannuation is going to come from in the ever-certain scenario where we can’t look after ourselves when we hit 65 plus?
Many of us have equity in our homes with an LVR below 80% if you purchased pre-2017.
Buying another residential property may not be wise in the current market unless you can add growth by doing the property up, subdividing, utilising a zoning change or changing its use.
However, a commercial property can be purchased cheaper (than residential), with a higher yield and with more definite value-added opportunities if carried out properly.
With yields in the range of around 5-7% in the main centres around Auckland and up to 10%+ in other areas, you will gain a positive cash-flow with a commercial investment.
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