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5 common mistakes when investing in commercial property

5 common mistakes when investing in commercial property

Investing in a commercial property is a great way to offer space for an up and coming business while also making a tidy income yourself. It can cover a range of building options such as warehouses, offices, industrial properties and retail spaces. Compared to residential letting, commercial lets can result in higher yields and ultimately more profit.

However, few landlords are familiar with the process of buying and letting commercial property unless they have done it before. Because of this, there are a few common pitfalls and mistakes which you should try your best to avoid. Here are 5 common mistakes people often make when investing in commercial property.

Choosing the wrong property

Remember the three most common factors in choosing a commercial property investment: income, capital growth and strategic purchase. Don’t let your emotions get the better of you, and don’t buy a property simply because you can afford it or you personally like it. This isn’t enough. You need to consider how appealing it will be to potential business tenants by evaluating factors like location, historical performance, yield and tenant type.

Choosing the wrong place

The best commercial properties are the ones located in an area and position where people frequently pass through. The better the foot traffic, the higher the interest and theoretically the more you can charge in terms of rental costs. Busier areas are usually located closer to necessary amenities and transport links, making them more desirable to potential business tenants. Location should always be at the forefront of your mind when choosing a property. A tourist shop located close to a popular city museum is a lot more likely to be of interest than one in a village or rural town.

The tenants don’t want it

This ties in to the two mistakes above, because if you don’t do your homework and ensure you are investing in the right property, you run the risk of ending up with commercial property which isn’t desirable to tenants.

This can be due to high rental prices, or the shape and size of the building itself. If your potential business tenants aren’t satisfied with what your lot is offering then it could be sitting empty for an extended period of time. Ask yourself whether you meet all the common business needs, including onsite parking, local transport links, office space, access to technology and rental prices which are in line with the surrounding area. Once you’ve secured tenants, be sure to check in with them regularly to ensure they are happy with everything. This will increase the chances of them renewing their lease once it ends.

Know your tenants and your business

Once you’ve secured a property, you’ll need to find the right tenants. Set up a thorough screening process to find the right people to rent your space. Getting to know both the business and the individuals who make up the business will give you a better idea of what they need.

Not factoring in the additional costs

Buying a commercial property is never as simple as just paying for the property itself. There are always extra costs to factor into any budget. If the commercial premises you are buying is old, uncared for or has poor services like air conditioning or heating, you need to know this and factor the costs of any repairs into your plans. It can be beneficial to get a professional surveyor to carry out a thorough check before you commit.

If you are struggling to make an initial deposit payment on a property investment, you can consider a commercial bridging loan from a trusted provider like Glenhawk. A bridging loan offers financial help quickly, so you don’t miss out on an opportunity to invest.

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