Investing in commercial property - is it a wise move?
Investing in a property is an exciting venture, especially when it comes to investing in commercial property. There is a potential to make some serious money, and most people rely on property investment as a means to eventually retire, since the work involved is so minimal.
Owning property will also give you something to hand down to future generations, ensuring the financial stability of your family when you are no longer around.
We will take a look at the many reasons as to why investing in commercial property is an astute move. We will also delve further into making the right buying decisions to help ensure that your commercial property is a money-generating success.
- Lease agreements on commercial properties are a lot longer than those that come with residential. A commercial lease agreement is usually between three to four years long. This provides the landlord with a good steady income.
- Businesses usually do not work 24 hours a day, so this means that you will only work when they do. At night most commercial properties will have an alarm monitoring service. More often than not this will be provided by the business in order to protect their assets that are held within your property. So, if anything does happen at night, the alarm company will notify the proper authorities.
- The tenants of your commercial property are generally the ones who are responsible for outgoings like rates and insurance.
- Commercial property is a regular income source in addition to primary revenue inflows. This brings us to the best reason to invest in commercial property, the earning potential.
- It is one of the few assets that actually appreciate with time. For example, when you buy a car, you can never sell that car for more money than what you bought it for. Commercial property can bring in large profits if the market is favourable.
- The interests of both you as a landlord and your commercial tenant are usually the same, to make money from the space. This makes it a lot easier to keep all interactions between you professional and courteous.
Even though investing in commercial property may be a sound option, there are still things that every new investor will have to take into account. Since we want to set you up for success, here are a few things to keep in mind when investing in commercial property.
- One of the biggest mistakes that new investors make is to fixate solely on the bond repayments. Remember, there are additional costs like rates, levies, utilities and maintenance that will need to be considered before you decide on the perfect place.
- Make sure there are no defects. Maintenance costs are one thing, but defects can land you in a completely different ball park when it comes to unexpected costs.
- Always make sure to request the approved building plans of the property before you go ahead and buy it. This is a large investment and it would be most unfortunate if you were slapped with a demolition order because the previous owner had built without the requisite approval.
- Consider how easy it is to access your building. Tenants will have to make money in order to keep paying you rent, so it is in your best interest to take things like road infrastructure, parking, congestion and the proximity to public transport into consideration.
Editor: Anchen Coetzee
Written by: Tereasa Dias
Subeditor: Wahl Lessing