Investment Property Commercial - What to Look for when Buying

What must you look for in investment property commercial? There are some common attributes that are common to whole range of commercial property investments.

Land Area

The most important factor to consider when investing in commercial real estate without doubt is the size of the land area. Buildings depreciate over a period of time. Their life can be any where from 20 - 40 years or a bit longer. The land values appreciate with time. So buy the biggest piece of land you can get.

In commercial real estate investing you must never rush out and buy a property simply on return on investment basis. You might land up in buying a big building sitting on a small plot of land.

If you make a mistake in buying a property that sits on a large piece of land you will be able to get out of the problem. But if you make a mistake with a property that has a very small plot of land then you are into big problem. It is always advisable to buy stand alone properties as opposed to unit titles where land is shared with other owners and redevelopment can become a problem without their consent.

Position of the Building

If the building sits right in center of the plot of land you will have problems in adding extensions or redeveloping the property. It is always helpful to buy a property that is located to one side of the section. It is very expensive to relocate or demolish a building for redevelopment.

Market Rentals

It is the rentals that determine the value of an investment property commercial based on capitalization rates. Commercial real estate investing is dependent upon determining the correct market rentals at the time of purchase.

Always buy a property that is under-rented. If you are not careful you will pay a much higher price for a property if it is over rented. There will also be no capital appreciation because there will be no rental growth at the time of rent reviews.

Traffic Flow

A commercial property with a high traffic flow which includes both vehicle and foot traffic will command a higher rental and as a result a higher capital value. Properties that have high exposure can also generate income through signage. High pedestrian count is absolutely critical for retail in comparison to other classes of commercial real estate.

It may be possible for you to convert a warehouse or an industrial property into bulk retail and massively increase the value of your investment if there is high traffic flow.

Street Frontage

Properties that are located on corner sights with high street frontage make much better investments. When you are buying an investment property commercial always look at the width to depth ratio. A property that enjoys a wider frontage in relation to depth will always be more valuable.

A building with a narrow frontage or down the right of way are difficult to rent.

Tenants want exposure as it is free advertising for their goods and services. They will pay a higher rent for premises that give exposure to their business.

Services

Businesses these days are run by technology. They need great amount of data cabling and power in addition to environment control, toilets, lifts, car parks, telephone systems, air conditioning and heating. If you buy an old building you must check if you can upgrade the services at a reasonable cost or you will find it difficult to find a tenant.

Transportation

The property you buy should either have adequate car parking within the building or have access to a car park building within 50 meters from where car parks can be leased. If the car parking is not adequate there should be easy access to public transportation system.

Easy Access

This is indispensable to any class of investment property commercial. The property you buy should be easy to exit in and out. There is no point in buying a property where trucks can not maneuver or deliver goods with ease whether be it retail or industrial.

Stud Height and Clear Span

Although rentals are based on per square meter you should never forget the third dimension i.e stud height when buying a commercial property. The height of the building creates the extra volume for storage and sense of space that tenants love. You will be able to command extra rent for a high stud building and not lose out on tenants because of this specific requirement.

Clear span means that there are no obstructed columns that will prevent a fork lift or container trucks from maneuvering or create obstructed views for retail shops. If there are too many columns in a building then it is poorly designed or they have been put there as a result of cost cutting measures.

Environment and Development in the Area

Environment such as proximity to gyms and cafes has become very important for tenants. Also look at the plans and projected development in the area that can change the value of the commercial investment property that you plan to buy.

Prestige

Prestige is another important factor to consider when you buy commercial property specially an office building or strata floor. Think from tenants point of view. Will they feel proud to be in the building. How is the foyer and the entrance? How are the building aesthetics'? Will the clients of the tenants be suitably impressed?

Please do not look for investment property commercial in your back yard. Commercial properties are much easier to manage because of the quality of tenants and length of leases. You can get very attractive deals away from the main commercial centers and in areas that are not considered fashionable.

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