Property is one of the safest and most profitable forms of investment, so if you’re considering putting your money here, it can be a very smart move. But while many investors choose to focus on residential property it can also be smart to look at commercial buildings as they can offer a fantastic return on investment.
If you’ve decided you’re going to put your money into commercial property, here, Dakota Murphey has provided the five key things that you need in order to make it a success.
Investing in commercial property might sound like a specialism, but you’re actually talking about a very broad range of buildings. Commercial property can encompass everything from retail space and warehouses to offices and hotels. Clearly the requirements and skillset involved in investing in each of these forms of property can differ massively, so it’s important that you should specialise at least initially.
It’s always best to start somewhere that you have experience within. Even if you’re brand new to commercial property investment, it’s a better idea to work with what you know. For example, if you’ve worked primarily worked in offices and have a decent understanding of what tenants require, you’re in a better position than if you attempt to invest in something completely unknown to you – even if it seems like a lucrative option.
An understanding of your market
It’s amazing how many first time investors will choose a market that looks appealing, rather than one that they understand. Consider the idea of buying residential property – it’s much easier to appraise and recognise value in a location that you know very well. The same is true for commercial property.
Take retail spaces as an example; in your home town you will likely understand the most popular retail spaces based on their position within the town and the natural footfall. This gives you an intrinsic knowledge of which spaces are valuable and which are not. But if you were to choose a market that appears to be more lucrative, such as London, you would not necessarily have that same local knowledge.
So make sure that you start within an area that you are very familiar with. Or if you are taking advice, ensure that your advisor has the kind of information you would expect.
A skilled surveyor
You really need to have a skilled surveyor that you can trust to provide you with relevant and impartial analysis on the condition of a property. It has been the downfall of many investors who believe they have found a bargain but have not had the property surveyed. Inevitably when the property has been purchased it will be revealed that there are problems. The expense of sorting these out completely strip away any profits, all because a survey wasn’t undertaken.
Clearly then you need to make finding a survey a real priority. Just as it’s important to have local knowledge of the area you are investing in, you need to make sure that your surveyor is experienced in the region. That means if you’re investing in commercial property in Surrey, you should choose commercial surveyors in Surrey! Choosing a cheaper option based miles away is only going to cost you in the long run.
An experienced solicitor
Just as you need a high quality local surveyor, it’s important to have a fast and experienced solicitor. The last thing you want is to be stuck waiting for months for the legal details to be finalised. A solicitor that you know and trust to work quickly can ensure that everything is sorted out in good time.
Remember that with the best intentions and research, you can never guarantee that everything is going to run perfectly. With any investment that is an expensive as commercial property you need to ensure that you aren’t putting all your faith in one aspect of the investment to come good. If you’re hoping to renovate and sell on that’s a fine plan to have, but remember that by the time you have completed your renovations the market may have moved on.
It’s vital that you should have multiple plans in place to allow you to mitigate any potential risks. Carry out a realistic appraisal of the issues that you could face and plan for worst case scenarios so that you know your investment is always safe.