The commercial property market can offer you a solid avenue for investment, but there are many things you have to consider when you first start dipping your toes in. These cover factors as broad as where to buy a commercial property and how much to invest, which is why you should get a Melbourne conveyancer to assist you in the purchase.
Even if you are a seasoned buyer of residential property, you should note that commercial real estate is a different ball game. For example, the factors that make a particular property attractive vary when it comes to buying a commercial rather than residential property. Even the process of commercial conveyancing is different when compared to house conveyancing.
Here are the top 5 tips that can guide you when buying your first commercial real estate in Australia.
1. Figure out your investment budget and goals
This is always going to be your first step when it comes to investing in property. Before you can make any decisions, you have to determine your investment budget and subsequently, your return on investment (ROI) goals.
When you have decided on your budget, make sure to stick to it. Unlike buying a home, which could be an emotional purchase, you should adhere to your judgment when it comes to buying commercial property. Pay attention to all the commercial property investment strategies that you will learn in this article.
And how do you determine your commercial property investment budget and ROI? Besides looking over your own financial capabilities and mortgage options, the answer lies in research, research, and more research. (You’ll find that this is a running theme throughout all the tips in this article.)
You should look into the local property market and find out what the average ROI is there, taking into account all the different factors that could affect it now or in the future.
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2. Pinpointing a location
Once you have determined your budget and investment goals, it will be easier for you to decide on a suitable location. Property moguls say that location is everything when it comes to making an investment, and they’re not wrong. Therefore, be thorough when it comes to finding out about the location you want to invest in Australia. You should try to avoid making a purchase in an area that you are not familiar with, as there could be underlying factors that you are not aware of.
When scouting a location, here are some of the factors that you should look out for.
- Keep track of property and investment trends in the area, with particular attention to the level of demand and supply for commercial property.
- Is there a lot of competition in the market?
- What about the different types of businesses there?
- Lastly, don’t forget to look into the current and future connectivity in the location that you are interested in. A reliable public transport system or convenient highway can do wonders for the property value in a particular area.
Being able to find the best area to buy a commercial property in Melbourne, Australia can to a large extent increase your ROI. An ROI of 9.5% per annum from a commercial property investment isn’t a bad idea.
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3. Don’t forget about finding a tenant
Assuming of course that you are purchasing a commercial property in Australia to rent it out, you should then remember to think about finding a suitable tenant. After all, it would be frustrating for you to buy a commercial property, only to face a lot of difficulty in renting it out later on. Needless to say, going a long period of time without a tenant can significantly affect your return on investment.
Therefore, take a look at how many vacant shops, offices, warehouses, or factories there are in the area you are looking at when you are doing your location research.
An area with many vacancies may signal that finding tenants could be a difficult affair. You can also start thinking ahead by planning your tactics for finding a tenant – through the use of property signboards or advertising, for example.
4. Be aware of the risks
Like with all investments – and in fact all purchases of property – there is going to be some level of risk involved. As an informed property buyer, you should study the likelihood of these risks occurring and ask yourself whether you are prepared to weather them. While it is impossible to predict all the different types of risk in the market, try to be as detailed as possible in your research to better inform yourself.
Some risks to be aware of involves the size of the property, as larger commercial properties can cost more to hold and are harder to lease than small ones. Future shifts in supply should also be another consideration, as an increase in a new property can create a threat to existing tenancies. Similarly, changes in infrastructure can bring a positive effect to your investment, but also have the potential to negatively impact it by shifting tenant popularity to other areas.
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5. Talk to the right people
Finally, a commercial property purchase shouldn’t necessarily be made completely on your own without any advice, especially as a beginner. You may not know how to value commercial property in Australia if you are a first-time buyer.
This is especially true for first-time purchasers, but even experienced buyers can benefit from seeking the input of relevant experts in the field. When doing your research and making your decisions, talk to veteran investors, accountants, and surveyors who may be able to offer you valuable advice on your purchase.
Hopefully, these tips will help point you in the right direction when it comes to making your first commercial property purchase in Melbourne, Australia. With the right research and business acumen, you can be well on your way to making your first purchase very soon.
Our step-by-step guide on how to buy a commercial property in Melbourne, Australia is one you may need to read again and again to fully assimilate it.