Investing In Commercial Property? Make Sure There Are No Nasty Surprises

If you intend to invest in a commercial property, you must make sure that all of your bases are covered.

Like domestic property investment, there are risks associated with purchasing commercial lots or office spaces.

It is important to lay the groundwork to mitigate risks as much as possible.

Oftentimes, risks can be reduced or avoided entirely through simple and effective communicating; be that with tenants, factors or other shareholders.

Here are some of the questions that you should always be asking yourself whenever you plan to invest in commercial real estate.

Make sure you are bringing in the right tennents

Firstly, it is important to make sure you are bringing in tenants who can provide you with some longevity.

While many startups can appear promising, it is best to let property to an organisation with a demonstrable history, or a meaningful plan.

Remain thorough when vetting commercial lets, because in some cases, a business will scale at a rate where they may have to leave or could fold due to market conditions.

As well as sensible people who will take good care of the property, you should prioritise businesses that are likely to remain on those premises for a long period of time.

Consider the function of the building

If your building is commercial in nature, you need to consider its ability to meet government legislation.

That includes consents for waste and effluent disposal if they operate in an industry like construction, which produces a large amount of waste that sometimes needs to be treated.

Similarly, commercial premises need specific insurance policies in place.

While this is often the responsibility of the business inhabiting your property, it is important to ensure that they are taking appropriate steps.

This will help keep you out of potential legal repercussions. Additionally, it will minimise the risk of a non-compliant business getting fined, leading to you having to find a new tenant.

Make sure responsibilities are properly defined

To reiterate on defining responsibility covered in the last point, make sure you know what responsibilities fall on you, on your factor or agency if you are using one, and your tennents.

Again, make sure you are effectively communicating who is responsible for what (eg; tenants responsible for utilities, factors responsible for facilities management, you are responsible for responsible outsourcing to trustworthy factors.

Plan long-term

Oftentimes commercial real estate investment is a long-term strategy.

With that in mind, it is important to make sure that tenants are able to fulfil long-term lease agreements where possible.

Long-term leases with creditworthy tenants are preferred, but flexible lease arrangements are becoming more common, especially in sectors like co-working spaces.

Don’t be afraid to ask around

There will be other commercial landlords in your area, and there are many communities that can be found online.

A quick way to get good information on commercial property investment is simply to ask someone with experience.

Knowing what factors are preferred locally, or what solicitors are known to make for smooth purchases is hugely beneficial in the early stages of your property investment journey.