Seven tips for first-time commercial property investors

CommercialFriday 15 July 2016

If you’re unsure of what to look for in your first commercial investment property, you’re not alone.

The world of commercial property has its own set of unique considerations, so it’s important not to get caught out on your first attempt.

Read our tips for commercial investment first-timers, and stay ahead of the game.

1. Learn about the economy

Whatever the industry, your investment will perform better in a strong economy. When business is booming, demand for transport, warehousing, products and services all increase.

Strong returns are also likely in good economic times, which indicate a sound investment.

2. Learn about your industry

Even in great economic times, some trades and industries will perform better than others.

Be wary of investing in sectors which are over-subscribed. Where there is lots of competition and price-undercutting, your investment may see higher tenant turnover.

In areas where new commercial premises are being released onto the market, your tenants may also be tempted away by the chance to upgrade.

3. Follow the infrastructure

Where are the major developments taking place? Great opportunities exist for commercial property investment wherever new transport, retail and business hubs are being constructed.

New freeways, industrial estates and residential complexes spell increased demand and an injection of money into the local economy.

Buy investment property within or close to expanding residential and business hubs and make a smart commercial choice.

4. Look at shifting population centres

Sea changes, tree changes and city changes are happening all the time. Where are the population shifts happening in your neck of the woods?

Avoid areas where large numbers of people are moving out – follow them to the areas of growth.

New residential estates and satellite suburbs all need to be serviced by healthcare, childcare, retail and lifestyle services, which can influence your choice of commercial investment property.

5. Factor in tenant shortages

Things are great when you have a tenant paying regular rent, but there may be times when your investment property is empty.

You need to budget for spells between tenancies where you will be without rental income, and have contingency funds to make ends meet.

During times when tenants are hard to come by, you may need to be flexible and offer both short and longer term leases to attract a tenant.

6. Don’t pay too much

Due diligence is required to ensure you don’t overspend on your first commercial investment.

Don’t just buy the first property that looks appealing: do your homework on the asking price of equivalent premises and competing properties for sale.

7. Enlist the help of an agent

Employing the services of a trusted agent with specialist experience and expertise in commercial property investment might be the best move you make.

They can help you avoid the common pitfalls of first-time investors, and advise you on the best kind of property to suit your needs.

Specialist commercial agents can also manage the property for you, taking care of everything from leases and rent collection to repair and maintenance of the premises.

They are expert in attracting suitable tenants and working out deals advantageous to both tenant and landlord.

So there’s no reason to fall short when buying your first property. A little preparation goes a long way in the world of commercial investment.