Direct ownership
Buying the property yourself?
You own and control the asset, and you carry the vacancy risk, the management burden and the concentration of having capital in one building.
COMMERCIAL PROPERTY
Commercial property investment, explained
How it differs from residential, how it is usually funded, and what to understand before committing capital.
THE BASICS
Commercial property is valued on its income
Residential property is largely valued by comparison with what similar homes nearby have sold for. Commercial property is valued principally on the income it produces — the rent, the quality and length of the leases, and the yield an investor requires for that risk.
That changes what matters. The weighted average lease expiry, the creditworthiness of the tenants, the structure of rent reviews and the cost of re-letting a vacancy all bear directly on both income and value.
It also changes the lending. Commercial finance is more conservative, terms are shorter, and facilities are commonly reviewed rather than left to run.
THE ROUTES IN
Two ways people access it
Syndicates and trusts
Investing alongside others?
Pooled structures give access to larger assets with less capital. You give up control, liquidity is limited, and you are relying on the manager.
Through an SMSF
Using superannuation?
Funds can hold commercial property, including business premises in defined circumstances. The rules are strict and the structure must be right from the outset.
BEFORE YOU COMMIT
What deserves scrutiny
What supports a commercial asset
- Long leases to solid tenants — income security is most of the valuation.
- Fixed or structured rent reviews — which build income growth into the lease.
- A location with genuine demand — re-letting risk is the thing that hurts most.
- Net leases — where outgoings are borne by the tenant.
Risks to weigh honestly
- Vacancies are long and expensive — commercial re-letting takes far longer than residential.
- Forecast returns are not guaranteed — targets in a memorandum are projections, not promises.
- Syndicated investments are illiquid — you generally cannot exit before the term ends.
- Gearing magnifies both directions — debt inside a structure amplifies losses as well as gains.
COMMON QUESTIONS
Questions about commercial property
How does commercial lending differ from a home loan?
Loan-to-value ratios are more conservative, terms are shorter, pricing is set case by case rather than from a rate card, and facilities are often subject to periodic review.
The assessment focuses on the property's income and the lease profile as much as on the borrower.
What is a property syndicate?
A structure in which a manager pools capital from a number of investors to acquire an asset that individuals could not buy alone, with returns distributed to investors.
These are financial products. They are typically illiquid, often restricted to wholesale or sophisticated investors, and they should only be considered with advice from a licensed adviser.
Can you recommend a syndicate to invest in?
No. Recommending or arranging an investment in a property syndicate or trust is financial product advice and requires an Australian Financial Services Licence, which we do not hold.
We can help with the lending side of a direct commercial purchase, and we can refer you to a licensed adviser for the rest.
Can my SMSF buy commercial property?
A self-managed super fund can hold commercial property, and in defined circumstances business real property can be acquired from a related party or leased to a related business at market rates.
The rules are strict and the consequences of getting them wrong are serious. This needs your accountant and SMSF adviser before anything is signed.
RELATED
The lending side
GET IN TOUCH
Looking at a commercial purchase and need the finance arranged?
Would rather talk it through?
(02) 9659 1694Important information
Visayab Financial Services provides credit assistance in relation to commercial lending. We do not hold an Australian Financial Services Licence, we do not offer, promote or arrange interests in property syndicates, managed investment schemes or any other financial product, and nothing on this page is an offer or a recommendation to invest.
Any forecast returns you encounter in this sector are projections that depend on assumptions which may not be met. Obtain independent advice from a licensed financial adviser before committing capital.
The information on this page is general in nature. It has been prepared without taking your objectives, financial situation or needs into account, so it is not personal advice and you should consider whether it is appropriate for you before acting on it.
Any rates, figures or examples shown are indicative only. Lending is subject to approval, and lender eligibility criteria, terms, conditions, fees and charges apply. Talk to us about what your own circumstances allow.