The simplest form of ownership is direct ownership where an individual or family trust owns the property in its own name.

The advantages are that you obviously have complete control over the process in terms of how you handle the tenants, rent reviews and so forth. You will also reap 100 per cent of any gains on the property.
The disadvantages are you will be responsible for any day to day management of the property and having to deal with routine and major maintenance items, tenant issues, lease expiries and renewals, statutory compliance issues etc. Also, you will be exposed 100 per cent to any fall in value of the property resulting from vacancy.
Many owners choose to have their properties professionally managed to avoid this 'hands on” approach and workload. It can also lead to savings for individual owners and their tenants as most commercial property managers bundle up the individual properties into a portfolio for tender purposes in areas such as insurance, fire protection, security and so forth, thereby achieving sizeable discounts which can (and should) be passed on to individual owners and their tenants.
Further, in today's litigious society with an absolute minefield of legislative compliance matters affecting commercial property, it almost becomes a commercial imperative to distance yourself as an owner from such areas through the employment of a professional property manager.
Perhaps though, one of the biggest considerations in engaging in direct ownership is the one which I referred to in last week's blog, namely that of liquidity. If you invest say $500,000 in a commercial property and borrow a similar amount from your bank, you may (in Tauranga) end up with two retail tenants (say paying $50,000 a year each in rent) or 3-4 smaller industrial tenants paying $25,000-$33,000 a year each in rent.
Now, the problem with this scenario, particularly with the two tenants example, is that if one tenant goes your income halves and you still have a mortgage to service.
Again, even fully tenanted and in a 'good” market you still need to find a willing buyer for your property if you want to sell. In other words, someone with a million dollars to invest, or at least the ability to raise that amount.
Of course, this happens every day in the market, but never underestimate the fact that you have to find that buyer.
Next week I shall talk about the nature of indirect investment and the various options open to investors.
Until then, have a great week.