Why commercial is the new residential
By Scott O'Neill
26 February 2021
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1 minute read
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Gone are the golden days where you could purchase residential properties with yields of 6, 7 or 8 per cent or build a self-sustaining property portfolio based solely on residential.
You simply cannot find these yields anymore. For a high-net-worth individual whose main objective is to get the strongest returns on their investment, adding a commercial property to their portfolio or shifting their portfolio purely to commercial is the only way to go.
Highest cash-on-cash returns seen in almost a decade
It is a fact that commercial property currently offers the highest cash flow you will find in Australian real estate. At Rethink Investing, we are currently securing 6-9 per cent net yields on the high-quality commercial properties we’re buying for our clients. However, when you look at the returns on your initial cash investment, the numbers are even better. We’re talking 25 per cent to 40 per cent cash-on-cash returns – something we’ve not seen in Australia since 2012. These numbers are the reason commercial property has caught the eye of sophisticated investors, not only in our own backyard but internationally, and has become a luring incentive for new entrants to the commercial property scene.