If you’ve ever heard an advertisement for Oporto’s delicious Portuguese chicken, you’ll be familiar with the tagline “just gotta go – Oporto!” This certainly rang true with Helen Tarrant, who was convinced to dive into the commercial property market when she found a premise for sale next to a bustling Oporto franchise hoping this would be the positive cashflow property investment she was after.
“I wanted something 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,” Helen says.
Commercial investing seemed to offer precisely that, so Helen took her $500,000 property budget and put it to good use.
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.
This was five years ago, at a time when Helen and her husband began investing in commercial property. While her husband had his eye on an office premises, Helen was seeking somewhere she could run her registered training college, so their search was geared towards properties that would suit their business needs.
“I had invested in residential property for a number of years, and it just never seemed to pay off,” Helen says.
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.
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 $22,000.
This huge return is possible due to the unique structure of commercial investments, Helen explains.
While residential properties tend to have steadier growth, commercial investments often offer a better rate of cash flow, due to the fact that 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, pays all these for – 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 fit-outs they add,” Helen says.
“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’s turned her back on the residential market and today, she teaches people about investing in commercial positive cashflow property and achieving sky-high returns.
After all, as Helen says: “Why invest in a residential property, where you have to keep forking out for plumbing repairs and council rates, when you can invest in a property where the tenant pays it all for you?”