With everything which has been going on in the residential buy-to-let market over the last few years, it’s hardly surprising that some investors have been taking a whole new interest in commercial property. If you’re new to this branch of property investing, here are four tips to help you get started.
Do your general homework on the sector
The broad principles of investment generally apply across any sector, but each industry area has its own specific characteristics you need to understand in order to be successful in it. Much of what you have learned in the residential property sector will also apply to commercial property; however, there are also some major differences you will need to grasp. A good approach would be to do some general reading, with a particular emphasis on understanding the necessary jargon, and then network with industry experts to test your understanding and develop it further.
Choose your preferred commercial property niche
Like its residential counterpart, the commercial property market contains a number of specialist niches, each with its own distinct set of traits. When you are just starting out in commercial property, you may find it best to choose a niche which has a lot in common with the residential property market such as student halls, care homes or hotel rooms. This can make the learning curve rather easier for those new to commercial property. As a side note, it is often best to stick to this niche to begin with so you can really come to understand it in depth and then diversify later if you feel the need.
Learn exactly how the numbers work for your chosen niche
When you buy a residential property, you generally buy a whole property, have ownership of its management (even if you choose to delegate to an agent) and decide for yourself what rates you wish to charge to tenants. When you buy a commercial property, it is much more likely that you will buy a “unit” within a whole and that all the investors will be mandated to use a designated management company, which will guarantee them an income for a fixed period and have a process by which investors can exit the scheme (after a certain period) by selling their units back to the vendor for a previously-agreed price. These differences can require some mental readjustment.
Get to grips with corporate financial statements
If you choose to buy a whole property and let it to tenants directly, then you’re going to need to understand corporate financial statements to be able to judge a prospective tenant’s financial health. If you choose to buy a property as an investor in a limited company and/or in a niche which depends on the use of management companies, then you’re going to need to understand corporate financial statements to be able to judge the health of a prospective investment partner. In short, if you’re thinking of investing in commercial property, it’s highly unlikely that you’re going to find a way round getting to grips with corporate financial statements.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
Angola might devalue the kwanza, as the country’s economy is threatened
Angola’s central bank governor said that the national currency, the kwanza, registered a 10% depreciation, from January to the current...
Real estate is at risk because of the exogenous crisis caused by COVID-19
Participatory real estate investment has not escaped the economic and health crisis. However, the consequences will not be the same...
The coronavirus has caused a rise in cannabis prices
According to a report published last year by the National Drug Plan, one in ten Spanish adults use hashish or...
Bitcoin hash rate is slumping due to uncertainty
While the Bitcoin price started to slowly increase again, the BTC hash rate is plummeting. According to blockchain.com, the maximum...
Italian biotech companies entered the race to find a vaccine against COVID-19
Several Italian biotech companies, such as Irbim, ReiThera and Takis, have entered the international race to develop a vaccine that...
- Featured6 days ago
Fintech is the bet of bankarization in the digital era
- Biotech4 days ago
Hemarina offers its oxygen carrier molecule to fight the COVID-19 pandemic
- Crypto5 days ago
Could the sale of $11.3 million XRP by MoneyGram affect the Ripple Hodler?
- Business5 days ago
The COVID-19 pandemic is a catastrophe for the world’s economy