When buying commercial real estate, you need to understand both why you're investing in something, and exactly what you expect to see in return. Here’s how to prove yourself as a smart commercial investor when it comes to property.
Understand the risks
As with all large-scale purchases, there will always be some level of risk attached to buying commercial real estate. You may be an expert in residential transactions but the markets have their subtle differences, and commercial trends are not necessarily affected by, or connected to, local housing prices. Make sure you fully research the state of commercial property in your area, so you know when the time is right to invest.
Know what to buy
There are many types of commercial real estate and they all expect different rates of return. Raw land is a long, slow investment. You could rent it for agriculture, timber, or possibly recreational ventures or you can simply hold onto it, if you’re willing to wait for the price to rise.
For many people, buying commercial real estate means purchasing a single business unit for a sole outlet, or a strip mall for multiple retailers. It's a good idea to analyse the footfall traffic around your potential investment before you buy to make sure it's on a good pedestrian thoroughfare.
Alternatively, purchasing a storage unit can provide you with a quick and surefire return, even if the gains are lower. Storage is almost always in demand and may provide a more secure return than a retail venture that has a higher level of risk involved.
Do due diligence
When setting up your investment, it pays to go through the whole process by the book. This means arranging all of the paperwork with your solicitor and taking a professional property specialist with you when viewing the site. Research the structural and financial history of the property to make sure everything is in order and that you won't come across any costly maintenance or legal issues along the way.
After the initial investment of capital in the property, it may take a while for you to see the rewards. However, for those who are willing to be patient, buying commercial real estate can be extremely lucrative, so you need to be sure you’re happy to tie up that capital for the long-term.
If you’re considering buying commercial real estate, our local expertise and global network can help you make an informed and secure choice. Our real estate brokers are active in all sectors of commercial real estate including office, retail, hotel and industrial spaces. Take a look at our Engel & Völkers Commercial website to see our full portfolio and to get further tips on handling your property investments.