4 Mistakes to Avoid When Investing in Commercial Property
Like any form of property investment, buying commercial property is both exciting and exceptionally risky. It can cover a range of building options, such as; office, retail, car park and industrial properties. While these investments can be tricky for first-timers, they can also trip up experienced investors with simple mistakes that lead to a less than ideal outcome.
After the reading the September edition of Month in Review by Herron Todd White, we found that 22% of office space in Perth’s CBD is empty. While this might seem like an alarming statistic, especially due to Perth’s deteriorating economic climate, it provides an excellent opportunity to highlight the mistakes investors can avoid when purchasing commercial property.
1. It’s not what potential tenants want
Whether it might be because the price is too high or the building itself isn’t a suitable shape or size, if your intended target tenants are not satisfied with the key requirements they need for their business, your investment is likely to stay empty. By failing to analyse the attributes of competitive commercial properties, and how factors such as location, zoning, and access may affect the potential performance of a business, you will find your ability to attract tenants will be difficult.
2. It’s in the wrong location
Supply and demand usually determine the rate of your return, and given that the location of a business drives demand, this should be one of the major factors in motivating your investment purchase. Although you might be swayed by impressive improvements of a property that is off the grid, if the property has a poor historical performance in capital growth, then you are better off looking elsewhere.
3. You rushed into the purchase
While you may have immediately fallen in love with the investment, your views and wants don’t always reflect those of your potential tenants. Rushing into a property without making a strategic decision based on research and consideration could seriously harm your investment return. Your decision to buy should be based on previous information regarding the yield of the property, the economic climate now, whether it meets your long-term objectives, if it will improve your investment outcomes, it’s location and if it will attract potential tenants.
4. It doesn’t meet local, state or federal requirements
Without conducting an independent investigation to ensure your potential investment complies with local, state, and federal regulations, your investment could run into major issues in the future. You need to ensure the building complies with zoning, has building permits and building code certifications to avoid costs and problems in the future. It is also a good idea to research the kind of developments that are set to begin in the area.
It’s important to note that most of these mistakes can be avoided with careful research, planning, and preparation. At Select, we offer no-obligation, quality and free advice to help you reach your financial goals. If you want to invest in commercial property and are unsure of what we can offer you, organise an appointment to talk to one of our friendly brokers to discuss your options.