EP. 126: Taking Your Portfolio To The Next Level, with Jay Anderson

In this week’s episode of the Geared for Growth podcast, host Mike Mortlock is joined by Jay Anderson for the second part of their discussion on building an optimal property portfolio. Jay is the Director and owner of Jay Andersen Property and in this conversation, the focus shifts to commercial property, as Mike and Jay delve into the factors that make this sector a compelling investment opportunity.

Jay explains why he gravitates toward commercial properties and identifies the specific sectors within the market that he finds particularly attractive. He highlights the healthcare sector’s ability to attract “sticky” tenant – those who tend not to relocate often – and discusses the typical lease terms found in the healthcare, childcare, and motel industries.

Jay further emphasizes the importance of tenant profiles and lease conditions in determining a commercial property’s value. He stresses that these factors are critical in his decision-making process when considering a property transaction. Jay also underscores the necessity of conducting thorough due diligence, understanding landlord responsibilities, and being aware of obligations related to repairs and maintenance before finalising a purchase.

Unlike residential properties, where 12-month leases usually allow for annual rent increases aligned with the market, the commercial sector often involves longer-term leases with predefined review mechanisms for the initial term. Mike and Jay discuss how these properties account for growth, with Jay providing examples of common rent escalation clauses and market reviews. They also address common concerns about vacancy risks and the importance of having a long-term strategy and outlook for these assets.

This conversation offers a compelling insight into the complex yet rewarding world of commercial real estate transactions and highlights the importance of having an expert advisor from the outset.

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In this week’s episode of the Geared for Growth podcast, host Mike Mortlock is joined by Jay Anderson for the second part of their discussion on building an optimal property portfolio. Jay is the Director and owner of Jay Andersen Property and in this conversation, the focus shifts to commercial property, as Mike and Jay delve into the factors that make this sector a compelling investment opportunity.

 

• Why is the goal to get into commercial if you want to start building a serious portfolio
• The entry point for commercial real estate
• The importance of the tenant and the lease itself
• The commercial sectors that Jay tends to focus on
• Why the healthcare sector makes for “sticky” tenants
• The structure of rent reviews and capturing market fluctuations
• The risk of vacancy in commercial and how it contrasts with residential
• The drivers behind the commercial property market
• The key factors jay focusses on in commercial due diligence

“To get that kind of passive income that someone needs to be able to step away from their job, to get that in a resi portfolio you need a seriously large portfolio so I think those numbers are actually a lot more achievable to do it in a commercial portfolio” 1:13

“Demand on healthcare and medical services is forever growing. If we have a look at some population forecast projection and tying that into kind of healthcare medical related services over the next 40 years the age cohort of 65 plus is projected to more than double and 85 plus is projected to more than triple” 6:20

“They’re really reliant on location which is obviously something that we want as a landlord.  We want a sticky tenant so medical’s very interesting in that space. Obviously the tenants themselves are high income earners” 8:03

“Childcare centres typical starting lease is about 20 years and then you might have 2 x 10 year options so leases are very very long. In motels the typical lease would be 30 years broken up into different terms” 10:07

“The number one reason we would reject a property or terminate a property under due diligence for a commercial property will be around the lease and the lease terms” 12:59

“So you work out a win-win scenario for the landlord and the tenant but anything we can do to get that rent going up is going to have a direct impact on the value of the property” 20:19

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