Photo by Zac Wolff on Unsplash
Investing in commercial property is a big decision and shouldn’t be taken lightly. It’s important to remember that buying commercial real estate is slightly different to buying your dream home.
First time buyers or people new to the commercial real estate venture often make similar mistakes which end up costing them in the long run. Here are three mistakes you can avoid if you embark on such an adventure.
Mistake 1: Failure to Think Long Term
There are a number of questions you need to ask yourself before you even start looking for property. It’s important to have an exact plan in mind to ensure the property is suitable for what you have in mind.
Smart questions include:
- What is your reason for investing in commercial property?
- Are you going to run your own business or are you going to lease the building?
- Have you researched certified leasing agents to assist you with the leasing process?
It’s important to know your short and long term plans before making the final decision.
Mistake 2: Not Considering Maintenance or Initial Repairs
Ideally, commercial property is bought with the intention of using it almost immediately to avoid losing money on your investment. It’s important to remember that buying a fixer upper in a commercial context isn’t the same as buying a home that’s going to be your weekend project while you’re living in it.
To attract the desired tenants and clientele, your business needs to be in tip-top shape from day one. Factor in all costs and the time frame of repairs & upgrades. With that also comes the question of security. Will your building need security while the renovations are taking place? Factor those costs into your equation as well.
Don’t forget to consider the cost of utilities like water, electricity, rates and any other expenses you’ll have on a monthly basis necessary to maintain the property.
Mistake 3: Not Considering Location vs Type of Business
It’s all good buying a home that you “loved the minute you saw it”. Buying your commercial property should have a little more research and less emotion connected to it. Once you have decided what it is you want the property for, you need to ask yourself if it’s the right location for it.
Consider the following:
- Does it make sense from a customer or visitor’s point of view? For instance, you wouldn’t open a quirky craft shop in the industrial area of town. But, you could open a takeaway as there’s a market for it with the lunch time crowd.
- How accessible is it to the customers you wish to attract? Research road infrastructure to ensure people can easily reach you.
- Is there sufficient parking for the volumes of customers or visitors you wish to attract?
Avoiding these three common mistakes, and asking yourself the right questions, will go a long way towards ensuring that you don’t end up regretting your decision. Commercial real estate is well worth the investment! Just be smart about it from the START!