There is always some degree of difficulty that you will encounter when investing in commercial real estate. In fact, even the most experienced investors will have to go through a series of predicaments before making the purchase. It is so sad to note that in the process, the simplest and most common mistakes are the ones often overlooked by many. You have to learn what these mistakes are so you will not commit the same mistake when you have to make that precious commercial real estate investment.
The property does not match your investment needs
This may sound simple but of course you will always ask yourself why invest when you know very well a certain piece of commercial real estate might be a wrong choice. You may have been persuaded to buy that property because of the promise that you will get a greater return on your investment out of it only for you to find out later that it will not really offer anything as promised. It is quite risky and complex to understand what is right from wrong in this regard but we can put things this way.
You have your reasons behind why you want to invest on commercial property. One of which is to obtain income from the purchase. Another is for capital growth. Of course, you may also be purchasing that property for strategic reasons like the need to expand your existing facility or to rent out the property to tenants who will need such space. Due to these varying needs, you then have to carefully think which property will suit your purpose for buying one. When you have considered that, nothing will ever go wrong in the long run.
Settling for features that your potential tenants will not want
Commercial property investments, as mentioned, are sometimes made to offer commercial spaces that tenants will lease. It will be very difficult to attract tenants to rent a space if you have invested in one that will not suit their needs. In as much as you want to make sure that the property you are buying will suit your needs, you also have to make sure that it meets tenant requirements. Along this line, you have to make sure the property satisfies the needs of tenants including access to public transport, provision for onsite parking, great location and all other factors that may affect their respective businesses.
Failure to investigate the real estate completely in terms of regulations
Investigating the space will require looking carefully into every detail from making sure there are no leaks on the walls and no stains on the floors to making sure that the buildings have complied with all local, state or national regulations for that matter. In this process, you may have to go through all the building code certifications, building permits and zoning permits and all other developments that have been planned within the surrounding area. If you want to make sure all is in place, you have to make your own investigation of the property along this line.
Choosing a wrong location
Location is known to drive demand and in any business, demand and supply considerations are very much crucial. You then have to make sure you get the right location for your commercial property. If you can do away with fit-outs and improvements that you see and consider better locations first then that will be better.
Remember those flashy improvements that you see will somehow be a way for the property owner to disguise that the structure is in a poor location. Do not be deceived by what you see. Remember that the property location will always open doors for better capital growth in the future.
Prioritising your needs over those of your potential tenants
You are the property buyer and with that in mind, you will always presume that your needs should always be part of the purchasing decision. Well, it is but understandable that you have to consider what you want in a property but with commercial property up for the grabs, you always have to give high regard to what your potential tenants need. It can be quite disappointing for you at times that your view is far different from the view of your potential tenants but because the property you are buying is supposed to fulfill their requirements then you always have to prioritise their needs.
Always remember that a strategic purchase should be based on the property’s yield and location. It must also be based on its performance. Cost can be part of your overall consideration but never presume that a low-cost property will be your best option. You have to bear in mind that the property satisfies your long-term objectives. This will be the best way for you to be able to manage risks and make improvements in the future.
Check our pages for the best options when it comes to commercial real estate in Toronto. We will help you find the ideal property while helping you avoid all the common mistakes made by investors.