How commercial property can fast-track your retirement goal

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June 22 2020
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Property investors who want to achieve a passive income in retirement should look into commercial real estate, an industry expert has advised.

During a recent episode of nestegg’s sister publication Inside Commercial Property Podcast, Rethink Investing’s Scott O’Neill highlighted how retirees can fast-track their journey to retirement through commercial investments.

“Far too often, I’ve seen clients of mine previously come in to buy a bunch of residential properties, they get stuck, they end up with poor cash flow situations and it doesn’t get them to their original goal to create an income to retire off,” Mr O’Neill said.

The property adviser explained that a $500,000 property with an 80 per cent loan, after taking out the mortgage, rates, you can still be left with about $500-600 a week.

He goes on to highlight that residential property investors with similar loan structures would likely only break-even.

“Commercial property fast-tracks that. That’s the reason people come to this space. It’s for the much higher cash flow,” Mr O’Neill said.

Mr O’Neill said that due to residential investors being the more mainstream option, many Australians believe it is the best option to put their money.

“Commercial is out of sight, out of mind. That is one of the reasons the returns are so much better. You’re dealing with investors who are particular with their numbers and they aren’t just going to jump into any deal with the hope of growing,” Mr O’Neill said.

He also explained that while traditional housing models, which have been successful in building wealth for Australians, still works, it is getting harder to achieve growth.

“Residential is all about buying, meeting the cash flow needs of the property and hoping it grows for the next 10-20 years.

“That model worked over the last 50 years. But it’s starting to get harder and harder to get that quick growth in residential.

“We’ve seen since 2017 across the country, the results in residential have been fairly underwhelming across the board,” he said.

Mr O’Neill said one of the major benefits to commercial real estate is that investors don’t need to get that 5-10 per cent growth to make it a good investment.

“It’s a good investment as long as the tenant is paying their rent and then it will grow on top of that,” Mr O’Neill concluded.

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About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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