Buying a commercial property as an investment? You need a plan to make everything work out in your favour.
Your commercial property investment plan should include both short- and long-term strategies. Commercial property success is more complex than residential, but the rate of return can be much higher as well. If you're planning to get into commercial property investing, focus on these key factors.
Short-term investment strategies
When considering a commercial property investment, look at the neighbourhood, the businesses in the area, the proximity to transit, universities, residential areas and retail centres, and see what's missing. If possible, ask locals what they miss in their area. Then seek tenants who will fill those gaps.
Build rapport with existing tenants by entering in as the new property owner with an open mind and willingness to listen. If you need to populate an empty building, work on creating a list of reasons tenants should be lining up for space, and establish clear expectations from the start.
Monitor any lease agreements that are due to expire and evaluate whether or not they should be renewed. Check market rates and find out how the business has been performing before you start negotiating. A higher rate could mean needing to make a concession elsewhere. A lower rate may mean you can try for a longer lease agreement.
Maintain the property assiduously, as this is a cornerstone of successful commercial property management. People will talk about a property owner who keeps up with the needs of the building and its amenities. This single act can make it easier to fill vacancies and increase rents as appropriate.
Long-term investment strategies
You'll need to stay on top of your lease agreements and maximise value where possible by paying attention to the market and leveraging shifts that are in your favour. Look at market shifts over the past 10 years, note where they are now and look into the future to predict what changes may be in the offing.
Be prepared to divest if the timing and the price is right. Your long-term plan could have been to only retain a property for five or 10 years, or you may have planned on keeping it 15 or 20 years. Always be aware of the potential for a windfall if the market turns in your favour and you realise your commercial property is in high demand.
When you buy a property, look at the chances of a future rezoning and analyses whether or not there is room for a plan B in your investment strategy. If you believe you can easily weather a rezoning, the investment may still be a good one. According to Business Insider, rezoning from commercial to residential in certain cities can significantly hike property values.
By planning for every eventuality, both short-term and long-term, you can protect your commercial property investment and increase the chances of its success. Get in touch with Ray White Surfers Paradise today to learn more about buying, selling and leasing commercial properties.