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A guide to first-time commercial property investment

By Greg Bell

If you are thinking of investing in commercial property, you’ve likely enjoyed a lot of great financial success in your life. However, there are a lot of ins and outs to investing your hard-earned money into commercial real estate that are unlike anything you’ve been involved with before, even if you have experience with residential real estate.

Perhaps the most important thing to keep in mind is that while there’s typically a lot of demand on the Gold Coast and elsewhere for residential space, that’s not always the case for commercial property. As such, you’ll need to have contingency plans for any number of issues, including longer-term vacancies than you might expect, all of which combine to make commercial property investment a bit of a riskier business than residential speculation.

However, if you are able to find success with the following steps, the return on that investment may end up being significant.

Start with the basics

As with anything else in real estate on the whole, the first thing you should look for in a potential commercial investment is location, as you might need to strike a balance between the price of the building in question and just how close it is to population centers or attractions, or the quality of the building or space when you take it over.

For instance, buildings that need to be renovated – in whole or in part – should carry a much lower per-square-metre cost than those that are already in great shape. You would, of course, have to put more money into the building to get it ready for a commercial occupant. Likewise, commercial space adjacent to or close by busy residential areas will cost more than those that are farther out.

In both cases, you’ll need to crunch the numbers and find a solution that works for you.

Level of involvement is key

If you’re buying a commercial property to lease to a business, regardless of size, you’ll also need to think about what kind of tenant you might want to deal with. For instance, you could buy a property ideally suited for a company looking to set up a new office, or one that would be used for a retail location. Other options include warehousing or manufacturing spaces. You could also have setups that allow for mixed-use spaces, or multiple businesses.

Each will likely require you to be involved with your tenant businesses as a landlord, in the form of building management and so on. Here, it’s important to carefully examine what you’re physically capable of handling, or might need to farm out to a more experienced property management team, especially when you’re just starting out.

Getting it right

Once you have identified what you can afford, done research into what kinds of properties are best suited to your needs and even potentially looked at some specific investment opportunities, it’s important to connect with someone with plenty of experience in this realm. A mentor is absolutely crucial to shepherd you through the process, making sure you don’t miss a single detail.

Not only will a mentor provide critical advice, but he or she will also be able to introduce you with other people you’ll need to successfully manage your property and finances around it for years to come. These can include contractors, accountants, real estate lawyers and more.

Finally, just as you have likely put together a plan already to enter the commercial real estate space, you would also be wise to have exit strategies to move on from this property. Whether it’s because you get an offer that’s too good to pass up, want to move on to bigger and better things, or some other reason, it’s critical to formulate plans for any contingency.

For more information about how to get into commercial real estate investment and find as much success as you can, get in touch with the experts at Ray White Surfers Paradise today.

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