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Diversify with Commercial Property

As the residential property market swains, many individual investors are becoming increasingly interested in commercial property. The recent ups and downs of the equity market have highlighted the benefits that real estate can bring in diversifying a portfolio, and property’s stable income flow is attractive to those worried about the adequacy of their pension provisions.

In response, a growing number of financial institutions and other product providers are devising commercial property funds targeted at private investors. However, property has something that most other investment classes don’t have … “physic value”. It’s something not to be under estimated. The ability to see, touch, photograph, walk around or drive past ones investment continues to make direct investment in immovable property a more desirable option to property funds. But as a tangible asset, commercial property also needs to be managed, and there are associated costs.

Commercial property has traditionally been the domain of institutional and professional investors. Most individual investors shy away from making commercial property investments. The reasons for this are many.

Commercial property usually requires larger sums of money both in terms of loan finance and the investors own deposit. The commercial property market has always suffered from a lack of liquidity and loan terms on commercial bonds are much shorter than those available in residential.

Additionally, commercial property investment requires a greater degree of sophistication and attention to mathematics than residential. These factors combined, often seem daunting to the individual investor and so the fear factor of not knowing plays a significant role in keeping many individuals away from diversifying their property portfolio with commercial property assets.

The current residential market cycle, while undesirable for most, is however causing many individual investors to search beyond the residential property market and into the commercial and industrial property markets. This at a time when these sectors of the South African property market are emerging from a long period of isolation from international property trends.

While this isolation has set the stage for a rally in the commercial sector, it is also a fact that industry players and individual investors alike are finding themselves without enough knowledge or skills with which to perform the more complex analysis associated with commercial property investing.

The result is that Estate Agents, familiar with the residential sector, are failing to apply the marketing skills they have practiced and become so efficient at over the past decade. And individual investors are passing up worthwhile investment opportunities because they too are accustomed to only evaluating opportunities of a residential nature. The outcome is a situation where estate agents, individual investors and the market are all staring each other in the face in an unproductive stalemate.

With a rally in the commercial sector forecast to continue over the next 5-years. There is no better time like the present for residential estate agents and individual investors to make the switch to commercial property. This is why we have prepared and are now launching the Commercial Investments for Beginners Course via the Property Investor Network Campus.

If you are interested in getting into commercial property investments, as a property practitioner or an investor, then take a look at the Commercial Investments for Beginners Course curriculum and reserve your place to the course by booking today.

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Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved.

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