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Before breaking into commercial property, there are hurdles that must be addressed.
Speaking to Broker Daily, Mecca Property Group founder Abdullah Nouh said serviceability is one of the key concerns that will arise early.
However, serviceability challenges can be overcome early through the use of niche loans.
“For buyers with limited serviceability, a lease doc loan can be a game-changer. This type of loan is assessed based on the strength of the lease, not the borrower’s personal income or liabilities,” said Nouh.
“As long as the tenant is strong and the lease terms are secure, lenders may offer up to 50 per cent to 65 per cent LVR. It’s a popular product for retirees or high-net-worth individuals with cash but limited serviceability. That said, lenders will still consider factors like property type, location, and tenant quality when approving these loans.”
Commercial property can have cheaper options than a layman may realise.
Nouh said there are good entry point properties around the $600,000–$700,000 mark.
“Around $700k, investors can access well-located regional or fringe metro properties with stronger tenants and better land value. These properties often offer more scope for value-add and stronger capital growth over time. Entry-level buyers should also ensure the lease is secure and that the building fundamentals are solid,” Nouh said.
There are various forms of property that can work for the budding investor, such as offices, retail, industrial, medical, and mixed-use buildings.
Nouh said that industrial sites tend to be the most in demand due to growth in e-commerce and lower tenant risk.
Medical can also be an attractive option when focusing on established practices.
On the other hand, offices can be risky due to high vacancy rates and oversupply in CBD areas.
Retail can be “hit and miss,” he said. “Small tenancies like cafes or fashion outlets often carry higher tenant risk and longer vacancy periods.”
New investors should avoid overpriced property with an inflated lease.
“This can lead to a drop in value when the lease ends or the tenant vacates. Always verify the strength of the lease covenant, the longevity of the tenant’s business, and ensure the tenant’s use suits the location,” Nouh said.
“Mitigate risk by targeting essential services, diversified tenant precincts, and properties with long WALE (weighted average lease expiry). Due diligence on zoning, future area developments, and tenant financials is critical.”
