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Easter’s been and gone, but have you still got all your eggs in the same basket?


New Zealand has a long-standing love of property, this has not been more apparent than in the last few months, where headlines surrounding property have been impossible to miss. Landlords under attack by new legislation, government’s setting it sights on house prices, Auckland continues to burst at the edges with more and more development and First home buyers eager to get on the ladder.


But long weekend’s can be a great time to take stock, assess our position and look for opportunities. So how do we diversify in Property and what other options do you have? This series will look at several options outside of Residential property and how they can stack up.


Diversification, to over-simplify, is in essence, not having all your eggs in one basket, and, while New Zealand is in love with residential property and its backyards, there are other options.



The classic diversification for investors has been into commercial property. Generally requiring more equity and a larger capital investment, commercial property can return good yields if you are smart with identifying an opportunity.


Firstly, Understand the property you are buying, not all commercial properties are the same in the way you would find with residential housing. A café building should not be viewed in the same way as a factory for example, the type of property you buy will affect everything, from cash flow to maintenance costs, potential fit outs and tenancy turn over.



Consider you end goal and yourself, are you looking for a strong yield from day one, or are you happy with a long-term steady income stream? Do you want to be able to drive by the property and see it, or would an out-of-town investment be an option? Understanding what it is you are looking for and what you need is crucial in the long term, property is a long-term investment, so getting it right (or wrong) in the beginning can have massive effects down the road.


Location, Location, Location. Where is the property located, what is in the surrounding areas, and is it required, or will the tenant not be there in 12 months? It is important to consider long term trends with commercial property, Public transport planning, changes in future zonings, where will the property stand in 3 – 5 years.



Funding on commercial property is different to residential, so understanding your situation is key to your long-term success. Generally lending terms will be much shorter, at 10 – 15 years, and the interest rate will likely be higher. Commercial finance rates are normally calculated at Base rate plus a margin. On top of that Commercial purchases generally require more upfront capital or equity ideally with a minimum of 30 – 35 %.


While this may all seem to rule many out, for some Commercial property can be a great alternative to another residential investment. However, getting the finance piece right from the start is crutial


If you want to discuss a commercial purchase, or simply chat about your existing property and finance, contact us today.


Disclaimer: This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. This publication does not constitute financial or insurance product advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. Publicly available Disclosure information can be found here.




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