commercial properties include any buildings used for business purposes, from shops and warehouses to flats and offices. And unlike residential property, which often carries a lease of 6 months to a year, commercial properties typically have significantly longer leases, ranging around 10-15 years. So on top of the fixed-rate loans that aren’t subject to changing rent, commercial investments also bring other advantages, such as tax breaks and the freedom to be the arbiter of important business decisions.
With all that said, here are the top 5 things every new commercial property buyer should keep in mind before entering the market:
1. Determine your investment budget and return goals
Commercial property investing covers a broad range, from small shops to large corporate headquarters and everything in between. When sitting down to plan your first investment, it’s important that you are sure the exact amount you can afford to invest and, if the worst case scenario arises, lose.
Once you know that, it’s time to start making preliminary plans about what kind of property you can get within your budget and the realistic ROI you can expect. Don’t get too caught up in this yet though, just be wary of the risk and reward involved in commercial property investing at your level. And try to take away a basic grasp of what affects returns—such as location, type of building, infrastructure, socioeconomics and the skill of the available workforce in the area.
2. Understand the current state of the commercial property market
If you want to make an informed commercial property investing decision, it’s absolutely vital that you learn the various ins and outs of the current market. This means examining the latest trends, from property value changes in certain areas to burgeoning technologies changing the commercial property landscape.
3. Research and consult experts
If you’re a first-time commercial property buyer, you will sometimes be in over your head. It’s just the reality of the situation. When this happens, the best thing you can do is put the necessary time and research into understanding all the moving parts of commercial property investing.
But even due diligence occasionally fails. In these situations, don’t be afraid to contact experts and professionals who have years of experience investing in commercial property. They’ll put you on the right track.
4. Learn the lingo in advance
Like any specialised market, commercial property buying carries its fair share of jargon. To save you some valuable time, we have a great rundown of the most common commercial property terms every first-time buyer should know.
5. Know what type of property you want to invest in and where
When it comes to commercial property, the location and type of property you are looking to invest in will go a long way in determining your potential returns. So always take supply and demand into consideration.
Whether you want to invest in a block of flats near public transport links or refurbish a disused warehouse in an up-and-coming neighbourhood, the old property cliché holds true, “location, location, location.”