Top Commercial Property Investors
Always Have a Master Plan

You need a good Master Plan
When you’re just starting out, your main aim is probably just trying to secure a worthwhile property.

However, to be truly successful, you actually do need to have a Master Plan.

And to help you, here are 6 Steps towards formulating one for yourself.

Step #1: Have an Exit Strategy

This may sound a little strange, when you are only just about to buy the property.

However, you should be looking forward and anticipating things like … emerging trends; your lease expiry dates; changing economic circumstances; and the timing of any significant expenditure required on the property, down the track.

Step #2: Remember it’s just an Investment

You need to care … but not too much. In other words, never fall in love with the property. Because, if circumstances do change, then you need to be prepared to part with it — without having any remorse whatsoever.

Step #3: Set a Time for a Formal Review

Many passive investors would prefer to simply buy a Commercial property, and then squirrel the paperwork away in their filing cabinets.

But every 4 years would be a good time frame for carrying out a formal review of where your property sits within the marketplace. And that won’t necessarily mean you need to sell — but it may.

What’s important is for you to make a considered decision to hold the property, for another 4 years.

Step #4: The Past is not the Future!

With Commercial property, things will change over time. As such, recent good performance in any one sector doesn’t always mean that will continue.

Therefore, you need to understand how cycles vary for each of the sectors (Office, Retail & Industrial) … relative to one another.

Step #5: Recognise why Values Increase

You’ll discover ongoing improvement in value results from two key factors:

  • regular increases in your net rental; and
  • a fall in the capitalisation rate over time.

So, you need to keep a close eye on things like … a looming over-supply of space within that sector; interest rate movements (particularly for Retail); and your current position within the growth cycle.

Step #6: Avoid Speculating

You ought not look to “trade” Commercial property, in the same way you might do with shares.

When you make your initial assessment to purchase, always have a 4-year time frame in mind.

And that’s because, you need to achieve a worthwhile after-tax return (within that time frame) … after allowing for your acquisition and selling costs.

This means, holding it for a longer period will provide you with an added bonus. Whereas, trading it in a shorter time frame would not prove to be cost-effective.

Bottom Line: Investing in Commercial property isn’t difficult … it is simply requires a little forward thinking. And in much of that will come with experience. Alternatively, you can shortcut that process by having a team of trusted consultants.

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