15 Commercial Real Estate Tips From Billionaire Gerry Harvey

Have you ever heard yourself ask this question: ‘What’s commercial property? ...and why do so many of the rich investors in the world own them?’
If you have—or even if you haven’t—there’s a reason why you were drawn to the title of this article (and why you clicked on it after all)… You want to know about everything there’s to know about investing in commercial property.
In any case, let me just assure you: You’ve come to the right place.
As a property investor and developer myself, I value having the right knowledge in my property journey. And I’m guessing so do you!
So, to help YOU out, I’m going to lay what I know on the table—right here, right now. I’ll share with you the top must-knows in commercial property, which include:
the logical reasons why it’s a GREAT idea to invest in commercial
the factors you need to think about before ‘diving commercial’, so to speak
the myths we need to take out of your vocabulary (your mindset!)
the practical tips that’ll help you get your loan approved and get your properties generate wealth
Yes, it’s going to be a well of commercial property knowledge in this article… And you’re here just in time to get the best of the best.
Don’t worry. Everything laid out in this article is going to be clear and to the point—yes, without all the unnecessary razzle dazzle.
As mentioned above, let’s delve into Gerry Harvey’s story—an Australian household name you most probably know.

A Practical Lesson from Billionaire Retailer Gerry Harvey

Gerry Harvey was not always ‘Gerry Harvey’.
I mean Gerry Harvey was not always the successful entrepreneur he is right now. He was once just an ordinary guy like you and me. Before he took that first step toward his eventual achievement of becoming a successful billionaire in Australia’s retail industry, he started from a working class family.
Born in New South Wales, Australia, in 1939, Harvey grew up to be hardworking in his own unique way. He dropped out of university when he was 17 years old, but he knew what he wanted: success. Like you and me, he wanted to achieve success. (And although he didn’t get to be a farmer—which was what he said he initially wanted to be when he was younger—he worked hard to attain success in life.
Yes, he inescapably dove with hard work and sweat and learned the ropes of becoming a successful businessman.
‘You get that air of satisfaction from achievement. It makes you feel good. We are only here for a very short time, and so you're crazy if you don't go out and try to milk it to the greatest extent you can

Gerry Harvey

In fact, he worked as a door-to-door salesman and sold vacuum cleaners and refrigerators in Sydney. And it was in that job where he met Ian Norman. The two became business partners and opened their first store in 1961. And as history unfolded, they became co-founders of the successful retail chain that is known today as Harvey Norman.
And even when he achieved his initial success, he didn’t stop there. He pushed on—repeating the satisfying cycle of working hard and educating himself… until he revolutionised and became one of the top retailers across the industry.
In 2019, Forbes ranked him No. 32 in their list of the 50 richest people in Australia. And with a net worth of $1.4 billion as of June 30, 2020, he has surely become a person who has managed to reach success in what he did.
So how does Gerry Harvey fit into the picture of investing in commercial properties? Well, it’s simple really.
One practical lesson we can all learn from Gerry Harvey is to consistently work hard while educating oneself on the way to success.
And that lesson, as you’ll soon find out and even experience yourself, is a crucial key in the route of investing in commercial property. In other words, by consistently working hard while doing your part to educate yourself on the ins-and-outs of commercial investing, YOU can attain success in your commercial property journey like Gerry Harvey did in his retail business.
So, are you ready to do the work?
READ MORE: Real Estate Success: From Residential to Commercial Properties

WHY You Need To Invest In Commercial Property

Many investors start with residential property because it’s familiar. But if residential property isn’t your cup of tea, commercial property is a good alternative.
‘Primarily, investors in commercial property are focused on retail office and industrial, and...one of the biggest benefits about it compared to say residential is that there’s basically no emotion involved when you’re looking at purchasing a commercial property—because it’s all based on the numbers.’

James Dawson

And there are many benefits to investing in commercial property. But you need to find the ones that you’re after the most. In other words, you need to have a vision.
If you have a clear vision of your property’s objective, it’ll be easier for you to make smart decisions.
So, what do you want to accomplish in the long run?
Most of us live in a home. But it’s just as easy for most residential landlords to invest in commercial property.
I’ll share with you three great reasons to go commercial.
READ MORE: From Residential To Commercial Real Estate Lease and Sale

Reason #1. You Can Get Longer Leases
With Commercial Properties.

Most residential investors can’t rely on long-term tenants since 12 month leases are the standard in residential. (Yes it’s possible to ask for longer leases, but it’s quite rare).
In contrast, tenants of commercial property investors will want to sign at least a 3-year lease. And note that terms can go up to as long as 15 years.
Meet successful expert commercial investor Tam Thorogood.
In Tam’s property journey, she succeeded in building her commercial lease properties portfolio.
She once told me that she preferred purchasing medical and professional buildings since the tenants in these spaces are, more often than not, ‘heavily invested’. She shared: ‘You get a longer lease, which again if you have a nice long lease and you go to the bank and you’re lending, it’s far easier to get your finance for that.’

Reason #2. You Minimize Your Expenses
With Net Leases.

It’s true! In many cases, commercial tenants sign net leases. These are contracts that require the tenant to cover most property outgoings. In some cases, the tenants cover 100% of them.
This scenario means you don’t have to worry about council rates and costly maintenance and repair. What’s more, since the tenant will use your property as their business premises, they’re likely to keep it in good shape, because that is what customers first see and impacts their brand image. (While, on the other hand, residential tenants might not be as careful.)

Reason #3. Affordability

Commercial properties are generally immune to the wild price swings of residential properties. That means they can be much more affordable than you might think.
Of course, if you look at high-end shopping malls or petrol stations at major intersections, you’re going to see mind-boggling numbers. But smaller properties like office spaces are quite affordable and attractive to mum-and-dad investors.
If you do some digging, you can find an affordable commercial property that offers much higher rental yields than residential!
READ MORE: How To Buy and Lease Commercial Properties with Tam Thorogood

WHAT You Need to Consider
Before Buying Commercial Property

So now, perhaps you’ve decided to invest in commercial property. What’s next?
You’ll have to do quite some research before you make your final decision.
Remember Gerry Harvey? In his considerable experience as a businessman, he needed to educate himself as mentioned earlier. Sure, he didn’t know everything at the beginning. But he certainly made sure he delved into the ins-and-outs of the retail industry as he went along. And that move involved an active decision on his part to go over everything in the industry and learn in the process of building his business.
Remember Gerry Harvey? In his considerable experience as a businessman, he needed to educate himself as mentioned earlier. Sure, he didn’t know everything at the beginning. But he certainly made sure he delved into the ins-and-outs of the retail industry as he went along. And that move involved an active decision on his part to go over everything in the industry and learn in the process of building his business.
For your investment to work out, you’ll have to cover all the groundwork as it relates to your chosen strategy. In fact, what I’m going to share with you are important things that determine the potential of your investment.
Here are the main factors you need to consider first before investing in Commercial Real Estate.

Factor #1. Location

There was this story of a prominent commercial investor who knew the value of location very well and the value of knowing exactly what to look for. When he got an amazing deal for a property in a location with great job opportunities and economics, he declined it.
Why?
This investor declined it because there was a population drop, and he knew that he couldn’t find his target audience there. So, he passed on the deal and looked for a better location with more growth opportunities.

This is the main rule of property investment, be it residential or commercial. When finding the right location, you need to think about the type of business that your commercial property caters to.
READ MORE: Turning $1 Million Investment Ideas for Passive Income Into Realty

Factor #2. Tenant

Since it will rarely make sense to flip a commercial property, your tenant will decide whether your investment pays off. This case is why you need to focus a lot of your efforts on making sure you get the right ones.

Sometimes, the property will already come with a business tenant locked into a long-term lease. But if it doesn’t, you need to make sure your property attracts the right prospects.
READ MORE: There’s Big Profit In Real Estate Commercial Property

BONUS: ‘How Can I Find the Right Tenant
For My Commercial Property?’

Here’s a bonus section for you.
Okay, so I mentioned the importance of finding the right tenant for your commercial property. Unless the property already has a tenant, you’ll have to do a lot of work to find a business worth investing a long-term relationship with.

You must then consider the following to find the best commercial tenant for your property:
1. BUSINESS TYPE
The first thing that you need to take into account is the type of business and its industry. That is because some industries are dying in the new economy, and new ones are replacing them. You wouldn’t want to rent your property out to a business whose industry will get disrupted, right?
For example, you’ll want to avoid traditional manufacturing or retail. Instead, it’s much more desirable to go with health or technology. Of course, there are exceptions. But the point is to always think about the long-term prospect of your tenant’s business.
2. OTHER BUSINESSES AROUND YOU
As much as the business tenant should meet your needs, you need to do the same for them. You must make sure that your property has all the features that business needs.
There was once an investor who generated great success through investing in a retail plaza. His property site is in a strong corporate neighbourhood—meaning that it made a lot of economic sense to invest. And when he met his tenant’s business needs, he started generating both healthy cash flow and serious capital growth.
3. SUPPLY CHAINS
When that is the case, it can be a golden opportunity to build long-term success. You can bring connected tenants together to ensure that they won’t have the need to move elsewhere. (Makes sense, right?)

Factor #3. Economic Developments

It’s important to note that commercial property is quite vulnerable to economic changes. If you don’t take economic developments into account before investing, you might end up losing money.
It’s important to look at the whole picture rather than any individual economic indicator.
It’s important to note that commercial property is quite vulnerable to economic changes. If you don’t take economic developments into account before investing, you might end up losing money.

BONUS: ‘What Are the Elements That Drive
Demand for Commercial Properties?’

Here’s another bonus insight I want to share with you.
Supply and demand are always among the first things you need to look into before investing in any kind of property. However, this case is especially important when you’re going commercial.
Even though some factors that drive the demand for residential property apply here as well, there are many more that you need to consider.
So, what exactly determines the demand for commercial property? Here are three of the most important elements:
1. POPULATION GROWTH
Population growth is always a good sign when it comes to property investment. Investors in residential property seek areas where people will soon need a new place to live. On the commercial side of things, you need to focus on the services that will benefit the area.
As the population grows, so does the demand for banks, coffee shops, shopping centres, and many other institutions and places. This scenario is a golden opportunity for those who position themselves well in the commercial market. (So, you’ve got to look at that.)
2. INFRASTRUCTURE PROJECTS
Large infrastructure projects can signal a big increase in demand for commercial property. A great example is the M7 development in Sydney. As the project went on, the demands for warehouses in the M7 precinct grew.
>> Insert a picture of the M7 development
And not to mention that new infrastructure projects can boost an area’s economy and job market! As more people look for business premises, investors will have more tenants to compete for their properties.
READ MORE: How To Buy The Best Commercial Real Estate in Sydney
3. POPULATION DEMOGRAPHICS
Aside from growth, you need to familiarise yourself with the demographic factors of your target audience.
For example, the demand for medical facilities grows with aging baby boomers. What’s more, government expenditure on health facilities and services is likely to account for around 25% of total Commonwealth spend.
You need to pay close attention to the way that demographics affect the needs for different facilities. This way, you can stay ahead of the competition and be among the first to satisfy the rising demand.
READ MORE: Get $51 Million Dollar Deal by Adding Property Value in Australia

WHAT Are the Debunked Commercial
Property Myths?

Now, let’s remove any of the untrue myths from your vocabulary and throw them out the window. (It is right to assume that Gerry Harvey undoubtedly did the same thing in his journey to success… because after all, mindset is key in any successful venture—like investing in commercial property.)
Let’s dive right in then.
It’s true. There are more than a few misconceptions about the commercial property market. And they may discourage investors who believe that it’s just too hard to get in the game.
However, while investing in commercial property is anything but easy, it’s not as hard as some make it out to be.
Let’s debunk some of the most popular misconceptions about commercial property.

Myth #1. It’s Too Time-Consuming!

The only time-consuming part about investing in commercial property is the beginning. If you play your cards right, you won’t have to devote too much of your time and energy into it in the long run.
Unlike residential property, commercial tenants take care of pretty much everything themselves.
Like what I’ve been pointing out early on: From paying the outgoings to maintaining the property, tenants assume the majority of responsibilities. If you negotiate the right deal with a quality tenant, there’s very little for you to do except to collect rents that result in higher yields than most residential properties.
And that’s a win-win situation for you and your tenant!

Myth #2. It’s Too Risky!

Don’t get me wrong. Yes, all investments carry a certain degree of risk. As a general rule, the greater the risk, the bigger the reward. But just because commercial property costs more on average than residential, it doesn’t mean it’s necessarily riskier.
With the right strategy, you can mitigate the risk and shield your property from outside volatility. The key here isn’t to eliminate all risks, which isn’t possible.
The great thing about commercial property is that it provides greater cash flow and can help you build a buffer for uncertain times.
You only need to find a balance between risk and profit that works for you.

Myth #3. There’s Something Wrong With
A Property That’s On Sale.

This one is a whopper.
As soon as people see a good deal, they can’t help but think that it might be too good to be true. While that may be the case sometimes, there are all kinds of reasons why someone might decide to price a commercial property to sell quickly.
Here are some possible reasons why a commercial property is on sale:
The owner wants to cash up and move onto something else.
It’s a ‘buy, renovate and flip’ type of commercial project.
The seller may be moving out of the county or state.
The seller wants to get it off his hands due to personal circumstances—period.
But how do you verify if the sale is legit and not a scheme? Well, again, doing your research and due diligence on the property is the key.
READ MORE: This Real Estate Strategy Generated 50% Profit and Grew His Business

Tips on How to Generate Wealth
Through Your Commercial Property

Now that you already have an idea of what it takes to start investing in commercial property, how do you make sure you actually generate wealth?
‘So, you know, there’s this huge opportunity for manufactured growth in commercial. I mean it’s similar to the idea of someone [who is] putting a granny flat or something on the back of a residential property. It’s like that on steroids.’

James Dawson

Well, I’ll get right on it—I’m sure you’re itching to read about the juicy details in this part of the article.
So, here are some practical tips for making sure that your investment in your commercial property pays off.

Tip #1. Be Diligent From The Get-Go.

The first few moves you make as a property investor are also the most important. To generate long-term wealth, you need to build a strong foundation.
How?
Scrutinise every detail when it comes to market research.
Leave no stones unturned and educate yourself on the property you invested in.
Pay special attention to the industry or sector of your desired business tenant. (Unless you go with a property that has an existing tenant, this step will be one of the most important tasks you’ll have to get right.)
commercial lease properties
‘I thought if I’m going to invest in commercial property, I need to know how it works.’

Tam Thorogood

Tam certainly built a strong foundation when she went into commercial investing. In fact, she went as far as becoming a commercial real estate agent. (Talk about passion!)
So, be diligent and you’ll see your hard work pay off in the end.
READ MORE: Expert Guide on Calculating Depreciation on Investment Property

Tip #2. Be Flexible.

While you should have an avatar of your ideal tenant, you don’t want to set it in stone. Don’t focus all your efforts on the one perfect tenant without looking at the bigger picture.
I remember a story of one investor who focused too heavily on the homeware industry. When one of his tenants lost their business and had to move, his ROI faced a great risk. If it wasn’t for the help of a team of experts, the investor’s property would’ve taken a huge hit.
Sticking to the same avatar in this case may have led to the investor taking on another problem tenant. So to resolve the issue, the investor changed the type of tenant and achieved a better outcome.
We can learn from that investor and follow his example.
Remembering to be flexible along the way can help you avoid mistakes and unnecessary stress—which is good for your finances and your health!

Tip #3. Have The Right Lease Structure.

Okay, this one’s particularly important.
Many landlords try to make a deal that mainly serves their own needs. That can hurt your long-term relationship with tenants and do more harm than good. What you need to do instead is negotiate a win-win deal.
How?
Think about the lease length that will ensure stability for the commercial tenant while still giving you a chance to jump on better opportunities further down the road. 

Also, figure out the methods and frequency of rent review, as well as an operating cost responsibility that benefits both sides (such as who pays electricity, water or council rates?).
Of course, the above won’t always guarantee success. But it serves as general guidelines to follow if you want to get serious about commercial property.
And that would be beneficial for you in the end.

Tips On How To Get Your
Commercial Property Loan Approved

All right! Now, let’s look at the very useful advice I’ve gotten on how to get your commercial property loan approved.
Don’t be afraid. This part may look overwhelming, but it’s actually not. When I talked with James Dawson, he actually pointed out a fact about commercial property loans.
He said: ‘If you talk to a good commercial broker, or your bank manager, you’ll find out quite quickly that commercial loans are sort of unrestricted as compared to residential. And the banks can do a lot more creative things with commercial loans than they can do with a normal residential investment loan.’
Now, it’s true that most property investors can’t buy a property outright. (This case goes for both residential and commercial property.)
More often than not, you’ll have to put in quite some work to get the loan you need.
Banks are tightening their lending criteria, so you need to make sure to check all the boxes that show you’re a reliable borrower.
Here are some tips for making this happen.

Tip #1. Have A Tenancy Schedule

Since it’s not something that banks require, many investors overlook this aspect of their application. But that’s a big mistake since it can do wonders for your chances of getting a loan. Your tenancy schedule should contain:
Section of property occupied
Tenant’s name and nature of business
Rental amount
Lease expiry date
These are only some of the main things you need to cover to show the bank that you’ll be able to repay the loan. It’s important to get into as many details as possible to prove that you’re a trustworthy borrower.

Tip #2. Have A Clear Strategy

As we all are aware, no lender will trust you with their money if you’re not able to prove that you’ll use it well. That is why when you apply for a loan, make sure to have a clear strategy laid out that will show exactly what kind of potential it has.
There was this story of how an investor managed to secure a mortgage to buy the freehold attached to a former railway sidings yard by applying this tip.
This investor already had an offer from the lender but wanted to see if he’d be able to negotiate better terms.
To make the long story short, thanks to a strong business plan, the lender gave this investor the money that he needed to buy a 7-acre plot of land with better contract terms!
So, it’s really crucial to have a clear strategy in the short and the long run.
READ MORE: Building your Commercial Property into High Investment Yields

Tip #3. Have the Upper Hand

Most investors get a quote and try to bring it down. Why not take a different approach?
Tell your lender the interest rate and fees that you’re comfortable with. Negotiate with them to meet in between. As surprising as this tip may sound, many of the lenders out there may try to meet your demands.
You can save a good amount of money over the life of the loan, so try to set your terms rather than complying with theirs.
Having the upper hand in getting your commercial loan approved is a big advantage for your finances.
READ MORE: How to Get A Return On Equity From A $20M Real Estate Portfolio

YES, You Can Invest In Commercial Property!

I applaud you for wanting to take action or challenge yourself more in your property journey by going the commercial property route.
You never know, but you may be on your way to becoming like Gerry Harvey in property—successful and still going strong even after how many years!
If you need help with getting started in investing in commercial properties, you can count on us. We at Property Investory are here for you!
‘It really is about taking the emotion out. And when you’re in having some, say, a problem with a deal...just probably step back a bit and really try and seek out the knowledge.’

James Dawson

We can equip you with the knowledge and expert advice about everything you need to get started and succeed in commercial property investing.
In fact, here’s a rundown of what we can do for you. We can help you:
find the right, quality business tenants for your commercial property
learn the intricacies of the commercial property along the road
navigate the ins-and-outs of securing a loan
[Contact us / click on the link below] to learn about our commercial property investment course that will put you in the driver seat.

THE TOP 5 FREQUENTLY ASKED QUESTIONS
ABOUT COMMERCIAL PROPERTY

What is a commercial property?
To explain, I’ll borrow the words of long-time, successful residential and commercial property investor James Dawson, who has been in the property game for more than 40 years! He explains it briefly: ‘Essentially, commercial properties [are] anything that is in the right zone to be a commercial property. But anything that a business can be operated in—could be anything from an industrial shed, retail shops, offices, hotels, and motels.’
Why should I invest in commercial properties?
That is a great question. The article above lists the nitty-gritty on the reasons why it’s smart to invest in commercial properties. But to answer your question, the three main reasons are as follows:
You can get longer leases with commercial properties.
You can minimise your expenses with net leases.
Commercial properties are affordable because they’re generally immune to the wild price swings of residential properties.
What are the three factors I need to consider before buying commercial property?
There are three main factors you should consider first before investing in commercial property—location, tenants and economic developments.
Can anyone invest in commercial property?
Yes, potentially anyone with the right mindset, grit and passion for education and hard work relevant to his or her property journey can invest in commercial property.

How do I start investing in commercial properties?
If you need help with getting started in investing in commercial properties, you can count on us. We at Property Investory are here for you! We can equip you with the knowledge and expert advice about everything you need to get started and succeed in commercial property investing. We can help you find the right, quality business tenants for your commercial property, learn the intricacies of the commercial property along the road, and navigate the ins-and-outs of securing a loan. Contact us or click on this link to learn about our commercial property investment course that will put you in the driver seat.
If you’re craving for more insights about property management or property managers, check out the article above. We’ve spilled all the juicy, helpful details you’ll need to know on your property journey today.

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