WHETHER YOU ARE an investor or an owner-occupier, there are important factors to consider when purchasing a commercial property. In a previous article, I mentioned a helpful App to assist in shortlisting potential properties.
You can download it onto your tablet or mobile device now if you haven’t already done so.
Simply click on the image to the right.
The App includes several short videos which explain how to align your Investment Objectives with the appropriate Buying Criteria.
Once you have a shortlist of potential properties, it’s important to delve deeper into your research.
Owner-occupier
As an owner-occupier, it’s beneficial to lease a property first to ensure it’s the right location for your business. This also allows you to avoid dealing with loan issues upfront. Spend the initial lease period determining if the area suits your business and use the remaining time to identify a nearby property that would ideally suit your needs.
Arranging Finance
Also, when seeking finance for a commercial purchase, it’s important to understand commercial property loans are structured differently from home loans. You should engage a good finance broker to guide you through the process.
Before applying for a loan, ensure that all necessary documents are up-to-date and accurate. Having enough equity is also crucial to cover your closing costs – such as stamp duty, legal fees, and the valuation.
Your Buying Radius
When searching for a commercial property, it’s advisable to limit your search to about 30 minutes from where you live, if you plan to manage it yourself.
If you’re buying in a different city or state, make sure your managing agent can quickly reach the property for easy management.
Stay Focused
Instead of purchasing separate strata offices or small warehouse units across different areas, consider buying two or three adjacent units with separate titles. This provides flexibility and may allow for negotiation of a lower price and management fee.
For larger purchases, it’s best to buy on one title and create separate titles to improve your growth potential.
Entering the “Big League”
Pooling equity can be beneficial, particularly for investors looking to purchase properties over $1.5 million. By setting up small private syndicates, investors can access properties in the $5 million to $8 million price range with less competition. This can lead to better tenants and potential growth.
Due Diligence
Performing due diligence is essential before finalising a purchase. Engage a qualified building consultant to inspect and report on the structural and technical aspects of the property. This reduces the risk of unexpected expenses or replacement costs in the future.
Legal and accounting issues should also be addressed by consulting with both of these professionals, before making any financial commitments.
Bottom Line: By following these steps and conducting thorough research, you should be able to build a trouble-free commercial property portfolio.
Best wishes …
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