What You Should Have!

80% commercial property

Not long ago, my portfolio is only consists of vacant land and residential properties. For me, it was a myth that commercial would filter away a lot of my cash at the initial stage especially when bank only willing to borrow up to 20 years and 85% comparing to residential properties whereby the loan tenure is longer and higher margin of finance. But it was a drastic decision that I make last year when I start to dispose majority of my residential and convert into commercial. The result shows that commercial really enjoying better rental and potential in terms of capital growth. Now I understand why the rich keep accumulating commercial properties. And imaging if your portfolio is consist of 80% commercial, virtually you will be less hassle to restructure your portfolio again over the longer term.

80% Rental

80% of your bank installment should be covered by your tenant. If you need to cover yourself using your hard earned money, I believe you are in the very danger position. It’s not easy to achieve this kind of returns unless you are investing in completed properties. For your information, 95% of my properties are completed with instant rental collection. I’m a bit skeptical over those who love to speculate. That mean buy low sell high. Buy during launching and start selling when it was complete hoping for a capital gain of 30%-50%. I believe it might work several years ago but recent prices sparkle might not give the changes for you to win again! Thus I advice all of you, to consider stable, steady and consistent returns over the longer terms says 3-5 years.  

80% tenancy is more than 2 years

Currently all my tenancy is more than 20 years. Lately I just signed another commercial property for 10 years terms. Yes you heard me right…I signed for 10 years. The agreement will complete at 2021J My purpose of investing is to collect “steady income”. As long as the rental collected enough to cover the loan or even minus a bit, I’m happy man already. Couple with longer tenancy agreement, it’s really release for me. I remember when I hold my residential portfolio last year. Its seem like every year I need to find new tenant. Every year I need to clean up my house. Every year I need to give 1 month rental to the agent. And it’s really time consuming when you are employed employees. Thus holding more commercial properties would help you to solve short tenancy tenure.

80% completed properties

This will solve your instant bleeding. Bear in mind, under construction properties required you to paid interest. There would be “no tenant” during this period. Yes, no tenant means “no rental”! You have to come out with your own money to repay the bank. You have to do that at least for 36 months or 3 years. Upon completion of the properties you might need to prepare to loss another 6 month due to maturity of the place. You cannot expect 80% occupancy instantly upon completion right? Look at our recent completed condominium like Alam Damai & The Peak Vista, do you think the occupancy has reach 20%? Both of them obtain OC 3 months ago!! It might too you more than 6 month. Thus you need to bear with it. Unless you purchasing completed properties you will get your tenant instantly after you SPA completed. Furthermore maturity risk is much lower. Looking at my most recent acquired commercial property, I was so happy when I manage to get good tenant to occupy my place for 5 years with 6 month advance cheque paymentJ.

If you have fulfill all the above, you will be the luckiest person in the world as you know your portfolio are really having steady capital growth and rental. As long as you lock in your cost for commercial, your rental yield would continue to climb. Not only that, tenant who manage to profit from their business would steadily paying you thus you would be hassle free for at least 2-5 years. At the end of the day, this is what you want right? Anyway to conclude, I’m not saying you should avoid residential. It’s a different view when you can accumulate some commercial since the amount invested is almost the same now. Happy Investing

Related posts:

1. Commercial vs Residential
2. Another exciting year of 2011

Tagged as: Capital Growth, Long Tenancy, Maturity Risk, No Tenant, Portfolio, Steady rental, The Rich