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At Allen Real Estate we love a high quality tenant who is also paying a strong rent. Ideally a rent that is net of costs and growing at CPI increases. We particularly like tenants in parts of the economy where demand is constant, growing and largely immune from economic cycles, a sector such as medical services.
Businesses that do well in slower economies, like medical services, have been in high demand from buyers and sometimes can sell with a relatively low yield. It’s still possible to still find solid returns with excellent tenants however, and you don’t need to go to a regional centre.
The following example shows that strong yields can still be achieved in excellent Brisbane locations.
$1.8m Medical Investment with Long Term Tenant – Brisbane
Key Details:
Location: Brisbane, excellent high traffic location close to the CBD
Price: $1,800,000
Rental: $119,000 per annum
6.6% net yield
6.6% net yield
– Healthcare Sector. Stable tenants, recession resistant (see below)
– 260m2 floor space – leased with options until 2031
– Outgoings payable by tenant
– Healthcare tenant for over 20 years
– 9 undercover car parks
– Outgoings payable by tenant
– Healthcare tenant for over 20 years
– 9 undercover car parks
– Close to bus, train, airport
Cashflow and yield is usually good on commercial, however with interest rates rising there has been pressure on margins. One feature of a quality lease is to have a fixed rate increase or CPI, whichever is greater, and at the moment the difference is significant.
My wife, who graduated as a doctor has mentioned the wisdom that ‘In tough times… a doctor never starves’… And medical is definitely an essential service and has potential to be recession resistant, which is an important consideration always.
