Investing in commercial property can be extremely lucrative if you get it right. However, like any other investment, there are costly pitfalls that can make you wish you’d kept your money in the bank. Here are some tips from Paramount Investments, a commercial property estate agents on keeping the following mistakes as a checklist of what to avoid when investing in commercial property.
Choosing the Wrong Property For Your Needs
Before you start looking for properties, make a list of your financial goals. It also pays to be honest with yourself regarding your risk appetite. Remember that investing in commercial property is riskier and more complex than investing in the residential market. You should also think carefully about why you’re investing in the first place. Capital growth, rental return, and creating a bank for future investment are the most common reasons. Whatever the case, be clear in your intent, as this will help you make the right choices if future problems arise.
Choosing the Wrong Property For Your Tenant’s Needs
When you choose your property location, look carefully at what nearby competitors are offering. How you stack up against your neighbours will have a significant impact on how your property performs. Look at the kind of tenant you want to attract, and ask what you would want if you were in their shoes. Think about factors such as parking, accessibility, proximity to public transport, and whether the property will be attractive to visitors.
Not Doing Thorough Building Checks
One of the most common mistakes investors make is assuming that any building offered for sale already meets building code. Check certification thoroughly, consult your own experts, and contact the local council to be sure. As well as checking your building, talk with the council about planned developments that could negatively impact upon your buildings rentability.
Choosing the Wrong Location
Like any investment, commercial property is a supply and demand game. Location is one of the biggest demand drivers in commercial property, which is why you’ll find clusters of similar businesses in certain areas. Not only will prospective tenants consider their own needs, they’ll think about how your building will impact upon their clients. Examples are call centres that are unlikely to receive visitors who don’t work there, and showrooms that need to be attractive and located where foot traffic is high.
Letting Your Emotions Run Wild
Just because a property has attractive décor and modern fittings, this shouldn’t sway your choice. Remember that your goal is to attract tenants, not rent the property yourself. Cast a strategic eye over the businesses historical performance, and measure these yields with the current climate, affordability, and the building’s current condition. Balancing these elements will help you make a wise decision.
Due diligence is where most people go wrong when investing in commercial property. Applying a strategic eye at the outset will save you a lot of headaches in the future.