If you're considering buying a commercial property for investment purposes, there are several things to think about in order to ensure a sound return on investment. Here are the most important issues to consider:
Balance Income with Capital Growth
When buying a commercial property for investment, assess both its secured forward income and potential capital growth. Forward income streams give investors an indication of viability and likely forward returns on the commercial property, so simulate future market cycles to determine how robust the investment is likely to be. Focusing purely on perceived capital growth over time can have disastrous outcomes when market conditions toughen. Overall, you should invest in commercial property that has a secure rental demand.
Consider Market Conditions and Trends
Where is the commercial property market heading over the next few months and years? Are we on a slow recovery or declining path? Good investment opportunities are always in existence as long as the necessary skills, strategy and tools are in place to successfully manage investment opportunities.
Structure the Deal Correctly
All property transactions are unique and possess certain positive and negative attributes. The ability to assess, plan and structure commercial property deals properly will always lead to increased returns, and investors lacking skills and experience in these areas will find it harder to maximise value. So, if you're new to the commercial property investment market, surround yourself with competent property practitioners who are capable of identifying and dealing with any pitfalls from a legal, pricing and commercial perspective.
Have confidence in the property developer
Use the Internet and social media platforms, such as LinkedIn, to assess a prospective developer’s track record. These days there are numerous mediums available to investors when it comes to performing due diligence before purchase. Once again, relying on your commercial property broker to recommend potential vendors is good way of ensuring that you are dealing with competent, transparent operators.
Be prepared to walk away
Even if an investment opportunity looks extremely attractive, if the terms, pricing or pitfalls are not optimal, be prepared to walk away. The bottom line is that successful commercial property investors know when to cut their losses - particularly when investment parameters are breached.