Three top tips for investing in industrial and commercial real estate

Published in Hunter Business Review September 2019.

My three best tips for investing in commercial and industrial property.

  1. Look at your tenant, the lease, and the rent.
    • Now! Don’t buy a vacant property unless you intend to occupy yourself.
    • The tenant and their lease represent the goodwill attached to your investment.
    • Obtain a copy of the lease and check, length, options, outgoings recovery, guarantees, rent, and rental increases.
    • Make sure the rent is achievable in the general marketplace.
  2. Look at the property
    • Above all, make sure it is not specialised. A specialised commercial building appeals to a smaller pool of tenants.
    • Make sure the property is not isolated or away from the general population density. This factor will make it easier to lease in the future
    • Onsite parking is still essential, along with disability compliance in the commercial properties.
    • Are there any maintenance issues looming – ask the tenant, they’ll tell you.
  3. Look at the price
    • What is the net yield? This amount is the rent left over after all outgoings are paid divided by the purchase price.
    • Ask about other properties that have sold nearby – and obtain a list and investigate.
    • Build your knowledge base about properties in your price range
    • Talk to the bank before commencing the search and see what your limits are as their lending criterion will be different to residential mortgages.

Finally, be extra cautious about investing in retail now. The retail market faces several headwinds in 2020. These include the continued challenge from online retailing, a shortage of parking in Newcastle, and lessors asking for unrealistic rents.

Post written by Steve Dick
0425 302 771

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