Small Business

4 Mistakes You Can Make When Buying Commercial Property

4 Mistakes You Can Make When Buying Commercial Property

When you invest in commercial real estate and property for a business, it can be a hugely rewarding decision.

Commercial property can cover a whole range of options for your business, from retail space, office rental, car parks and even warehouses.

The yields often tend to be higher and tenants are able to sign lease agreements which are full-repairing and insuring. 

However, there are very few investors and business owners who are familiar with the process that is involved when buying commercial property and there are, unfortunately, some common pitfalls and mistakes to be made, no matter how experienced you are.

Commercial property is valued differently to residential property and the value which is attributed to commercial premises is related directly to the income and yield, so it is important to get the buying process right.

With this in mind, here are 4 mistakes you can make when it comes to buying commercial property.

Buying a property with poor footfall

When it comes to buying a property for a business, then you need as much exposure as possible, especially if it involves selling to the public.

Often, the best properties are located in a position where people will visit, but also where they may pass by and visit even if they are not from the local area. 

The better the footfall, the higher rent tends to be, so location should always be at the forefront of your mind when it comes to considering commercial properties.

When viewing commercial properties, be sure not to fall for common tricks of the trade, such as impressive fit-outs or modern applications. These are often done to disguise a properties value and designed for short term use only. 

Is it right for you?

If the property has been on the market for a while, this should indicate some warning signs.

Sometimes, the length of time that a property is on the market for is related to the price being set too high, the building is not big enough for the target market or it’s in a poor location.

If viewers aren’t satisfied with the building’s basic requirements, then the property could be sat empty for a long period of time. 

When you view a commercial property, you need to assess whether it is right for you, your business at the current moment and the projections you have for your business in the future.

Before you invest in commercial property, if you can, talk with the neighbouring tenants and see if they are planning on renewing or reviewing their lease and what the area is like. 

Not factoring in additional costs

Anyone can buy and invest in property, but making it work for you and your business is a whole other thing.

If the commercial property you are interested in is old, run-down and has poor services, then you will need to do a lot of work before the property is occupiable again.

If you are considering buying a commercial property in a run-down state, then hiring professionals, such as building surveyors and tradesmen, is very unlikely to have been factored into your budget.

Getting your building survey done is one thing, but it is solely your responsibility to understand any implications and get them checked over. 

Making the wrong decisions on property

When it comes to looking at commercial property for sale, one of the most common mistakes made is making the wrong decision.

You need to make sure that you find a property which not only suits your financial goals but also your appetite for growth and any potential risks.

The three most common choices when it comes to buying property are income, strategic purchase and growth. 

Therefore, letting your emotions get the better of you will be a costly mistake.

You shouldn’t be buying commercial property just because you deem it to be affordable, or because you like it.

You need to base the purchase of commercial property on factors such as location, historical performance, yield and tenancy.

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