Strategy: Commercial property

With residential, you mostly buy a building and the land under it, and hope rents and values rise. Commercial flips that: you're really buying an income stream secured by a lease. The tenant's business pays you rent under a contract that can run for years, often with built-in rent increases. The building matters, but the lease is the asset.

That single shift changes how you value the property. Residential is priced off recent sales of similar homes; commercial is priced off the income it produces, expressed as a yield.

"Outgoings" are the running costs of a property — council rates, building insurance, and maintenance. Who pays them depends on the lease type.

Under a net lease, the tenant pays the outgoings on top of the rent — so more of every rent dollar reaches you. Under a gross lease, outgoings are baked into the rent and the landlord carries them. Either way someone pays; the lease just decides who, and how visibly.

WALE stands for Weighted Average Lease Expiry — the average time left on the leases in a building, weighted by how much income each tenant contributes. A long WALE means your income is locked in for longer; a short WALE means re-leasing risk is coming up.

Tenant quality (their "covenant") matters just as much as lease length. A government department or national chain on a 7-year lease is very different from a new cafe on a 1-year term. Ask: how strong is the business, how essential is this location to them, and how easily could they be replaced?

Good commercial leases grow your income automatically. Rent reviews reset the rent periodically — by a fixed percentage, by CPI (inflation), or to market. Renewal options ("rights of renewal") give the tenant the right to extend, which protects your WALE.

When you read a lease, map out the review pattern and the renewal rights — they tell you how the income will move over the years you own it.

Commercial rewards homework. A structured due-diligence pass covers the lease (terms, reviews, renewals, outgoings), the tenant (financial strength), the building (structure, seismic rating, condition), the zoning (what's allowed now and next door), and the market (demand, vacancy, comparable yields).

Know the risks you're taking on, too: single-tenant risk (one empty tenancy can mean zero income), longer vacancies than residential, and larger deposits with finance assessed on the lease and tenant — not just your salary.