Top tips to buy your first commercial property
Updated: Nov 19, 2020
If you're buying commercial property for the first time, the pandemic has created complexities but also opportunities. There are a lot of factors to consider, and it is key to make the right moves from the start.
Get clear on your goals and objectives
What do you want to achieve through this commercial property? How does it fit into the bigger picture of your wealth plan? Do you want to achieve high cash flow, or are you looking for capital growth over a longer period of time? Is it the start of a bigger plan, where you plan to acquire more property, or will you look to keep it simple? Your goals and objectives should be the key influence on how you approach your first commercial property.
Understand your financial capacity
Work with your accountant and a good finance broker or bank manager to understand how much you can spend, your borrowing capacity and how you'll manage the costs. Deciding on the type of loan deal you take on is crucial.
Also establish your risk tolerance – are you prepared financially and emotionally? How well can you weather any financial events that hit? You may want to start your commercial property investment journey conservatively, to avoid stretching yourself too thin.
Understand the trends and latest data
Do your homework. Work off trusted independent property research, not mainstream media headlines which can often project angles that are not necessarily true. Along with quality research and data, secure the information firsthand by speaking to the experts.
Before starting aimless research, first understand the factors you need to look out for when analysing trends and identifying ideal locations. Some of these location indicators include the number and type of infrastructure projects planned in the region, distance from the city and population demographics. When researching property market trends, look at which property types are in high demand and low supply within an area.
This information is easily accessible through local council websites, annual reports and other resources, or by consulting with real estate agents in the area.
Find the right location
Further, finding the prime location is a matter of considering a range of factors such as where the property is specifically situated in an area (for example on a main road with traffic visibility, or hidden down a side street), whether you’re smack bang in the middle of a city hub or in the suburbs.
We mentioned planned infrastructure, but also consider existing access to shops, other commercial properties that generate activity in the area, high density residential areas and access to transport.
Finally, you want a location that isn’t already saturated with your type of commercial property, which will tip the demand-supply scale in the wrong direction.
What type of commercial property will you go for?
It’s recommended that you initially select a specific type of property and educate yourself in this market e.g. industrial. Once you’ve found your niche and begin searching the market, keep an eye out on the condition of the property. Is it an old and run-down or modern with better facilities? Does it have the potential for expansion and improvements?
A battered building structure doesn’t always mean it’s instantly off the table, but you need to seek professional advice on whether taking on this responsibility is in the best interests for your strategy.
So, where should you be looking now? Currently amid the global pandemic, industrial, storage warehouses, convenience, non-discretionary retail and data centres are running hot. But be sure to look further out than today. Researching the trends will ensure you make informed decisions.
Attract the right tenants
You want a tenant who is reliable, financially stable and respectful to the property. It will be a major hassle having to deal with tenants who frequently struggle to make payments or cause damage to your property. Your screening process should be thorough and consider their business model, assets and finances.
Get support from a buyer's advocate and other trusted experts
While there are great opportunities in commercial property, there are increasing complexities and there has never been a more important time to get quality, independent advice from experienced experts.
A buyer’s advocate will do the research, identify properties, negotiate and handle the whole process for you. You'll also need a great accountant, finance broker, lawyer and property management team.
Team up with Broadway Property
Our team of buyer advocates will help you make the best possible decision for your first commercial property, and take away the stress and complexities. Contact us for a no obligation discussion about your needs.