Commercial property is a fantastic investment opportunity that has the potential for a significant return on investment. Yet, there are a few things you should know before investing to make sure it is a success and to also maximise your potential profit. The risks and initial investment are higher with commercial property than residential property, making it a perfect option for people wanting something bigger and slightly more challenging.
• Know Your Target Tenant To Maximise Profit
Before you can start looking for commercial properties to purchase, it is absolutely essential that you have a clear idea of who your target tenant will be. This will allow you to consider their needs throughout the process to create a property that will be in demand, thus increasing your opportunity for a good profit.
You can choose from retail, office or industrial spaces for your investment, with many subcategories in each of them. Talk to people in the industry you decide on and ask them what they would look for in the perfect property for their business. Small implementations that potential tenants can’t get anywhere else could sway them to commit to your property.
• Location, Location, Location!
Once you have decided on your ideal tenant, it is also important to consider where the best location would be for that tenant. If the location is wrong, your potential yield will be lower than anticipated. So, consider what both your potential tenant and their customers might want. If you’re targeting industrial businesses, then a focus on good motorway transport links would be beneficial, for example.
• Consider Environmental Impact
Before investing, you should work with specialists to evaluate the potential environmental impact of the building. Properties that aren’t considerate of their environmental impact could be faced with penalty charges, so understanding what you need to do and implementing changes is extremely important.
An evaluation would be useful prior to purchase, as you may not have the funds available to rectify significant environmental damage, so the investment would not be worth it. Things like energy efficiency, carbon emissions, water usage, potentially impact on nearby environments and toxic waste must all be risk assessed.
• Buy Through An Auction
When it comes to actually the actual purchase, consider using a commercial property auction. You are likely to get a below-market price through the auction and the process is much quicker as contracts are usually immediately exchanged.
Make sure you don’t overbid, as you could end up paying much more than the property is actually worth. Go into the auction with a ceiling figure and if it goes above that figure, you know it wasn’t right for you. It may be tempting, but overpaying will only reduce your potential return on investment.
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