Resources

  • Investing in Commercial Real Estate

    Investing in Commercial Real Estate

    Investing in Commercial Real Estate

    When good opportunities present themselves, most everyone would like to be investing in commercial real estate. With this in mind, here are three mistakes you’ll want to avoid making whenever you’re investing in commercial property:

    Mistake #1: Not Being An Expert At What You’re 
Investing In

    “The grass is always greener on the other side” applies within commercial real estate, too.
    When you have a good knowledge in one type of commercial real estate within one specific use property or geographical area, and you’re presented an opportunity to buy within a market you’re not familiar with, be very careful. The cap rate being offered to you may be higher than what you’re used to. The building may appear to be in a better area, the property may look nicer, newer, and cleaner, but this doesn’t necessarily mean that the property you are considering is a better long-term investment for you.

    In these situations, ask yourself the following question: “If this building is such a great investment opportunity, why have all of the local investment experts decided to pass on it?”

    Before you decide to purchase the commercial property yourself, you will need  to understand why all of these local investment experts have collectively decided to pass on it.

    Mistake #2: Not Understanding the Specific Local Trends

    Why is it that both people and businesses want to be located within this area? Is the demand to be located within this area something that you can expect to continue on? Are there underlying factors such as zoning changes, new developments or infrastructure changes that could cause this demand to wane over the coming years?

    How much the rising cost of energy impact real estate investments within specific geographical areas? Will rising petrol prices cause a shift in demand for both people and businesses to move away from certain geographical areas towards other geographical areas? If so, how will it affect the demand for your property and business.

    Mistake #3: Not Doing Your Homework

    Within any given commercial real estate acquisition, you need to be doing your homework. Find out if there are any red flags that would indicate potential environmental contamination, review all the details of the contract with your solicitor and review the property’s leases. If there is a business involved with the purchase ensure that full accounts are provided to review with your accountant.

    When you’re investing incommercial real estate, you’ll normally be investing a lot of your own money. When you avoid making these kinds of mistakes, you’ll help to ensure that your money will be wisely invested.

  • Obtaining the best Price

    With the recent softening of REAL ESTATE property prices it is now more important than ever to obtain the highest price for your property. Every property owner wants to get the highest price whenever they’re selling or leasing their property. That’s one of the main reasons why people own property in the first place…to maximise their returns and the money they make while owning the property. With this in mind it’s interesting to observe some owners doing things that are in direct conflict with what will have them receive the most amount of money for their properties.

    When selling or leasing your property, the way to maximise the amount of money you receive for it is to get the word out to the greatest number of people who would be interested in it. Yet there are property owners who prefer not tell many people about their property, and they end up just putting their own sign on it. Or even worse they won’t even put a sign on it and they won’t advertise it anywhere either. This approach almost guarantees you receiving considerably less money for your property, as compared with if you instead did what would maximise its exposure to the kind of people who would be interested in it. The most savvy investors want to buy REAL ESTATE that is not on the open market, because they know that’s when they make their best INVESTMENT purchases. They love being the only people negotiating with owners without any competitors even knowing that the property is available That’s when they believe they can buy COMMERCIAL REAL ESTATE for the lowest prices. An owner simply can’t receive the highest price for their property when there are many potentially interested parties who don’t even know that their property is available.

    Think about it for a moment…If you had a used car that you wanted to sell which of the following two approaches do you think would bring you the highest price for it?

    I) Placing flyers advertising the car in the mailboxes of the 10 closest houses to your own

    2) Advertising the car in the used car section of the newspaper with the greatest circulation in your area

    Clearly the second choice is the one more likely to bring you the highest price for your car, because it has a much greater chance of reaching the people who are looking to buy a car like yours. The 10 neighbors living the closest to you may not be in the market for a car like yours, but one of them may be willing to ”take it off your hands” for a price considerably less than your asking price. And in the process you might think this was the best price you could have obtained for the car.

    So similarly, if you don’t list your PROPERTY with an experienced COMMERCIAL REAL ESTATE AGENT and put it on the open market when you’re ready to sell or lease it you’re more likely to receive a lower price for it. There’s a reason why the most successful companies and investors list their properties when making them available to the public. They know that the exposure their properties will receive will result in the highest price imaginable for them, and they won’t be leaving any of their own money on the table at the same time.

  • Maximising your investments value

    Maximising your investment value

    There’s nothing worse than a good business that is suffering from problems that are easily resolved – problems once rectified would have an impact on your investment property value.

    Richard Lyon presents the following article to outline the importance of good presentation.

    Commercial Property Interior Designer

    As a designer I am often asked to help ‘lift’ a property and inject some much needed energy into the place. More often than not the problems are to do with appearance and general maintenance both of which can usually be easily resolved.

    Recently I was asked to help with a commercial premises in Western Sydney where trade was declining and the building, though large, had little or no street presence. Having identified the problem, all the work done was to the external facade only and business improved dramatically. Maintaining the appearance and function of your business is a wise and cost effective strategy allowing you to maintain a high visual profile and maximise both your rental returns and the potential sales price.

    Far from being a costly and time consuming exercise the steps required to make your business or property stand out from the crowd are often simple, cost effective and easily done.

    A successful property/business needs to impress your clients and project your image and services effectively to the market place.

    Richard Lyon from Lyon Thomas Design. E-mail: rlyon@lyonthomas.com.au

  • Commercial Property Leases – Gross & Net Rents

    There are two types of leases when it comes to commercial property. These are:
    a.  gross rental leases and
    b.  net rental leases.

    Net rent

    Net rent is essentially the base rent wherein the tenant has the sole responsibility to pay the maintenance and operating expenses, real estate taxes and insurance costs for  the commercial property whether it being commercial office, industrial or retail. At the beginning of the period when a tenant takes possession of a property, he makes an additional payment to the base rental, which is a predetermined proportion of all maintenance and operating expenses, the state taxes and insurance costs for the property. Although these may be excluded in certain circumstances, these are mostly compulsory charges that tenants have to pay.

    To put in a nutshell, the rent is broken up in to two parts.

    (1) The base rental, which usually increases annually at a fixed rate (CPI or market value) and
    (2) a proportion of the outgoings which increases at the same rate as the actual outgoings for the individual property.

    Gross rent

    Conceptually, gross rent is the opposite of net rent. A gross lease amount includes all maintenance and operating expenses, council rates and taxes and insurance costs for the entire term of the lease. The tenant has no obligation to pay rent other than basic gross rental. This is usually calculated by the landlord and has the outgoings included in the total amount based upon the anticipated expenses. Sometimes tenant may have to pay a percentage of the increase in outgoings from the first (base) year of the lease. On other occasions, depending on economic factors, the landlord may choose to absorb some of the outgoings.

Search

Investment Type

Property Value

Type of Property