5 factors to know when buying your first commercial property

By Greg Bell

If you're thinking about buying a commercial property as an investment vehicle that provides you passive income for years, you likely know that this isn't the kind of decision to make lightly. However, what you may not know is the many ins and outs of buying that first property and then managing it for a long time to come.

The following are just a few things you will need to keep in mind about this kind of major investment, so that you're always set up for success:

1) You have to be careful about your tenants

Unless you are buying a residential property that you intend to rent out, most commercial properties come with the caveat that vacancies can be hard to fill, according to TGC. It's often fairly easy to fill a vacant apartment or home, but when it comes to a purely commercial space, it often takes longer to find that right fit. As such, you should be careful not to lease to just any business, and be more judicious about figuring out who to rent to.

After all, if a new tenant doesn't work out relatively quickly, it can leave you scrambling for months to find a new option. However, if you find a reliable choice, you can perhaps expect a successful, years-long relationship.

2) Location matters more for some types of businesses

They say real estate is all about "location, location, location," but there's more to it than that as far as commercial property is concerned. Depending on the kind of companies you are hoping to attract, some buildings might be better investments than others. For instance, it might be perfectly fine to have a small retail space out in the suburbs, as long as there are people living nearby, but having an office space in such an area might not be the best idea because that's not where a large workforce is going to be.

3) Surprise costs can come up at any time

If you already own a home, you probably know that there always seems to be something new to fix. Property Buyer advised that you take the same understanding into buying a commercial property, with the added caveat that these costs or the effort involved in maintenance and repairs can be even more significant than with a residential property. As such, you need to build that potential into your financial planning.

4) You need to do a lot of due diligence before a purchase

Another thing that's akin to buying a home is that you will have to be quite careful about learning as much about a potential property's history as you can. You don't want to commit to a major purchase like this and then find out the foundation needs serious repairs, or that many different businesses in that spot failed in the past.

5) You should craft your leases carefully

In the commercial real estate game, it's always important to know who's responsible for what, to avoid any confusion and potential acrimony, noted. That information should all be spelled out in the lease agreement. Who covers the insurance? What about council fees? Repair costs? You may choose to put all those costs on the tenant or, depending on the situation, take them on yourself.

When you're thinking about buying any commercial property, it's important to have a qualified professional on your side. That's especially true when it comes to first-timers, so get in touch with the experts at Ray White Surfers Paradise today. We can help guide you through these complicated processes with ease.

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