The dos and dont’s of commercial property investment

The commercial property sector is a seductive one for many real estate investors thanks to its potential for impressive cashflow. However, it is also a higher risk field than residential investment and can be tricky to navigate. 

We’ve put together a few dos and don’ts to clarify a few things about the world of commercial property investment:

DO draw up a detailed plan

Establishing a robust investment plan will help you to determine which properties will help you to achieve your financial goals. Rather than simply opting for deals that look good at the time, focus on factors such as mitigating risk, cash flow potential, and how individual investments fit into your long-term plans. 

DON’T go at it alone

People that manage to successfully invest in commercial property tend to rely on an expert team of professionals. Indeed, it is simply unrealistic to take on all of the tasks related to your investment and it may be useful to find people that can fill in any gaps in your knowledge. A commercial buyers agent, for example, may be able to keep you stick to a buying strategy and key property types backed by data, whilst a property manager could help you make your investment properties as attractive as possible. Lastly, having a mortgage broker (not just anyone) on your side who specialises in commercial lending ensures you can navigate through the appropriate lending products. At InvestorKit, we help you build your team as part of the process.

DON’T pay too much for your properties

Inexperienced commercial investors are susceptible to paying too much for properties, particularly if they don’t have a strong handle on the market. To avoid this fate, ensure that you are fully aware of how much similar properties are going for, $ per sqm2 rates, macro industry trends in that commercial asset type, ‘normal’ net yields and other lease due-diligence to avoid any hidden lease incentives etc… In turn, your pocket and borrowing capacities will thank you!

DON’T forget to budget for expenses

Commercial property investors often forget about budgeting for expenses when considering the enticing long term leases and great net yields. A small tip for expense preparation can be to review the average ‘first listed for rent to leased’ dates amongst similar property types in the same region. When taking that data + accounting for outgoings (when untenanted) This will help you predict assumed rental vacancy costs in advance.

If you are looking to start the transition of your real estate investing journey into commercial property and are unsure of where to get started. Contact the team at InvestorKit today if you need more guidance on investing in commercial property. Click on the button below, to book your free consultation.