While it might seem like a huge step up from residential real estate, investing in commercial property is not just for the wealthy and offers a wide array of advantages. Attractive returns and long lease terms are among the reasons many choose to step into the commercial world and reap the benefits.
The Commercial team at Richard Matthews are always happy to offer a helping hand when entering or dipping your toes into commercial property – here are a few considerations for any commercial decisions:
What to look for in a commercial investment:
Ease of access and volume of foot traffic are paramount in the success of a customer or client-based business and should be carefully taken in to consideration at all times. Access to parking is also highly desired. Take a moment to consider how people will access the premises and if there are any road blocks that would deter from visiting.
Long Term Area Plan:
Consider the growth projections of the surrounding area in the coming years. Are there many new buildings planned or in process? Are there government backed growth plans for new infrastructure? What is the local demographic – is it wealthy, young, old, employed etc.
Have a wander around the local area and consider how many vacant premises are close by. Are they similar to what you are looking for? High vacancy rates could raise a red flag that you may have trouble finding or keeping a tenant in the area.
Do your due diligence on your potential tenant. How long have they occupied the premises? Is the rent always up to date? Are the lease expiries in the building staggered?
Consider the upkeep of the building and if it is an attractive place to visit.
Other excellent considerations when investing in commercial property include:
- Strong rate of return on capital invested – generally a higher return than residential
- Providing a secure income system
- Structured rental increases are often included in lease agreements
- Commercial lease periods often range from 5 through to 20 plus years
- Leases are often transferable
- The responsibility of council rates and water often falls on to the tenant
- Commercial tenants often add value to the property