Buying commercial property comes with high risk and high reward.
A fortune can be made in commercial property, but first time investors should be aware of the risks and do their research, experts say.
Newland Burling and Co director Olly Newland said residential investments were generallyeasier for investors to get their head around but commercial investments could be more lucrative if the right research was carried out.
"The majority of the population don't understand how commercial property works," Newland said.
A great deal of research needed to go into even the simplest commercial properties, he said.
"People do it all the time and make a fortune."
Before buying commercial property investors should make sure there was an existing good qualitylease in place on the property and find who the tenant was.
"Everything else comes second."
Houses tended to be easier to on-sell making residential property a far more liquid investment than commercial property, he said.
Commercial property was not as forgiving as residential property if an investment mistake was made, he said.
"If you make a mistake there you may be stuck with it for life."
Commercial property prices were largely driven by the income yield and the quality of the tenant, he said.
Banks also don't lend as much for commercial property, typically lending only 60 to 70 per cent of the property's value, he said.
Investors also needed to be mindful when leasing commercial properties because they were dealing with a different class of tenants than residential property, he said.
"Most commercial tenants are pretty savvy."
Unlike residential property there was no tenancy tribunal for disputes between commercial property owners and tenants which meant any grievances had to be settled in court, he said.
Financial adviser and commentator Martin Hawes said most people would find commercial property beyond their financial reach because it required greater amounts of money than residential property and banks were not as generous with their lending.
Investing in NZX-listed property trusts could be a more accessible and lower risk way to get exposure to good quality commercial property, he said.
However property trust share prices were susceptible to stock market movements, he said.
Most investors delved into commercial property after gaining experience investing in multiple residential properties, he said.
"They might spend 10 years developing a residential rental portfolio before they start to move into commercial property.
"It's much more sophisticated from an investors point of view and small retail investors can't easily get into good quality commercial property because it's just so much money."
Commercial property for under $1 million was not likely to have a good quality location, tenant, lease, rent and terms, he said.
"They are the things that tend to drive commercial property investments."
Property syndication is another way of gaining exposure to the commercial property market allowing smaller investors to invest in commercial, retail or industrial properties.
Hawes said property syndicates often involved a single building with a single tenant which meant the investment performance was reliant on one business.
"Whereas property trusts might have two dozen properties leased to hundreds of tenants and you've got the diversification of your rental income."
It could also be difficult to sell the investment, he said.
"I'm not mad on syndicates because they lack liquidity."