How To Take Your First Steps In Commercial Property Investment

 

How To Take Your First Steps In Commercial Property Investment

As a residential landlord, you may well be looking at commercial property as a new avenue to add a different revenue stream to your property portfolio. There are many things that are similar but also some things to be aware of that are very different and as such you will need to be going into this area with both eyes open. Here are some of the major things to be aware of when making the switch to commercial property investment.

Research The Area

Even more so than with residential properties you need to be aware of the character and history of the area as well as it’s future direction. If you are brave then you can try and look to areas that you predict are going to be the focus of regeneration in the coming years, this way you can get in early and buy up land cheaply as the cost of an area always fluctuates.

Get A Good Contract Lawyer

Assuming you are looking to rent the properties out then it's important to realize that commercial contracts differ in many ways from their residential equivalents. Firstly, it is much more common for tenants to be responsible for maintenance and repairs so it’s important to know this and have it securely in the contract, this means you are not then stuck paying for potentially high repair bills that should really be the tenants' responsibility. Length of leases are often much longer as well, often running between 5 and 10 year periods, as ideally, you'll want as long as possible. Get a good contract lawyer to have this done properly.

Be Sure Of The Property Condition

If you are buying an existing building then it’s essential to know the condition of the building as some older commercial properties can be in such a state of disrepair that they are not able to be used. A good and thorough commercial building inspection is all you need to tell you what the state of play is here. You could lose out hugely if you have misinterpreted the condition of a property

Think About The Lifespan Of The Buildings

Unlike homes, commercial buildings have a much lower life-cycle and it’s often the case that you see commercial buildings are put up and then torn down after 50-60 years. This should be made to factor into your thinking and planning for the long-term, especially if you are buying an older property. It’s not just the cost of repairs etc, an older place may be less desirable to a lot of businesses and you could find it more difficult to rent out.

Know How The Place Will Be Managed

Especially if you are buying property abroad then you will know that it will need to be managed and if you have a variety of places then it would make sense to get a specialist commercial property manager on board. The level of support required is usually a lot less than for residential property as the tenant turnover and amount of issues are usually more minimal, however you will still want to be ensuring that there is someone making sure the property is in good order and not being abused or used in a manner that is not fit for purpose.