THE DEFINITIVE GUIDE TO

INVESTING IN

COMMERCIAL PROPERTIES

OF NEWSTEAD

BY: RILAY MARK

Abstract

Commercial and industrial property investment is an excellent way to build your assets, create income streams separate from your core business and plan for your retirement. Here's what you should be thinking about if you've decided it's time to invest in your own property, instead of paying off someone else's asset with your monthly rental bill.

I. Introduction

Are you interested in commercial real estate investing? Please read through this guide to find out some of the fundamental concepts of this type of investment. Commercial real estate investment properties can offer a good “passive” income opportunity.

The following guide will lead you through some of the essential steps of a successful investment journey. Also, it will point out why it is important to perform your due diligence (as well as some of the benefits in commercial real estate investment).

Let’s get started!

II. What Are Some Types Of Commercial Real Estate Properties?

The commercial real estate niche is a large one. From offices to retail malls, billions of square feet of commercial space is leased to operating businesses. Let's take a look at the major property types.

Office

From downtown high rises to suburban office malls, this specialty is a large one in the business of the commercial real estate. Though much of the volume is in leasing, when a sale happens, it can be quite large. A firm understanding of the needs of the lease client in their

business goes a long way toward creating success as a commercial real estate agent in the office space.

Dealing with local and national businesses requires a firm grasp on your market characteristics. Repeat business in larger areas with national companies can make this a lucrative commercial real estate specialty.

Retail

This type of commercial property usually has a larger turnover due to the constant inflow of new entrepreneurs and the failure rate of new retail businesses. In addition to the regular property transfer considerations, location is quite important. Economic and demographic data, as well as traffic flows and other criteria, must be analyzed with regards to business sales volume.

Understanding the different types of leases is important for retail work. From the gross lease to the Triple Net lease, there are a number of ways landlords and retail tenants structure their relationships.

Industrial

The industrial segment of commercial real estate includes warehouses, manufacturing, high tech, and processing type facilities. With the environmental, legal and zoning issues involved, this specialty requires a great deal of expertise. Both leasing and sales comprise this specialty.

Environmental concerns are much more in play in the industrial real estate space these days. There are a number of special disclosures and inspections that are required with the environment and pollution as the major concerns.

Business Brokerage

This is a highly specialized area of commercial real estate. The broker isn't just dealing with the real estate, but also with inventory, equipment, customer base valuation and more. With many owners having spent many years building their business, it's imperative that the broker be able to help them with a realistic valuation, especially when it comes to the intangibles, like the value of the client/customer list.

Investment

Though many residential real estate agents and brokers engage in some activity with a small unit and apartment investors, this specialty involves some very large transactions and can be a great niche for the commercial agent. It does require a high level of expertise in financial analysis, and the toolbox of indicators and mathematical tools is a large one.

Commercial Real Estate is a Great Specialty for Many Agents and Brokers

There are many areas of specialization in the commercial real estate business. Those agents and brokers interested in it can usually find a segment that suits their personality and financial goals. It usually takes much longer to become established in the commercial real estate niche, but the income can be worth it.

You need to know about the location as well.

Newstead (4006) is a suburb of Brisbane, Brisbane City, Queensland. It is about 3 kms from QLD's capital city of Brisbane. Newstead is in the federal electorate of Brisbane.

In the 2011 census the population of Newstead was 836 and is comprised of approximately 49.8% females and 50.2% males.

The median/average age of the population of Newstead is 36 years of age.

67.8% of people living in the suburb of Newstead were born in Australia. The other top responses for country of birth were 4.4% England, 3.8% New Zealand, 1.9% United States of America, 1.4% Saudi Arabia, 1.3% South Africa, 1.0% Northern Ireland, 1.0% Iran, 1.0% India, 1.0% Ireland, 0.8% Papua New Guinea, 0.8% Germany, 0.7% Colombia, 0.7% Italy, 0.6% Brazil.

81.5% of people living in Newstead speak English only. The other top languages spoken are 6.1% Language spoken at home not stated, 1.7% Other, 1.3% Arabic, 1.0% Cantonese, 1.0% Italian, 0.8% Polish, 0.7% Spanish, 0.7% Greek, 0.7% Mandarin.

The religious makeup of Newstead is 27.6% No religion, 25.5% Catholic, 18.1% Anglican, 7.5% Religious affiliation not stated, 6.3% Uniting Church, 3.1% Presbyterian and Reformed, 2.0% Islam, 1.7% Buddhism, 1.3% Judaism, 1.3% Other religious affiliation .

40.9% of people are married, 44.6% have never married and 8.1% are divorced and 2.2% are separated. There are 33 widowed people living in Newstead.

73.7% of the people living in Newstead over the age of 15 and who identify as being in the labour force are employed full time, 18.0% are working on a part time basis. Newstead has an unemployment rate of 3.5%.

The main occupations of people living in Newstead are 35.9% Professionals, 23.9% Managers, 15.8% Clerical & administrative workers, 8.5% Sales workers, 6.2% Technicians & trades

workers, 4.0% Community & personal service workers, 2.8% Occupation inadequately described/ Not stated, 1.9% Labourers, 1.0% Machinery operators & drivers.

The main industries people from Newstead work in are 21.7% Professional, scientific and technical services, 9.0% Health care and social assistance, 8.0% Construction, 6.8% Retail trade, 6.8% Transport, postal and warehousing, 5.2% Accommodation and food services, 5.0% Financial and insurance services, 4.7% Education and training, 4.7% Wholesale trade.

26.2% of homes are fully owned, and 20.4% are in the process of being purchased by home loan mortgage. 51.1% of homes are rented.

The median individual income is $1263 per week and the median household income is $2480 per week.

The median rent in Newstead is $490 per week and the median mortgage repayment is $2766 per month.

(Source: https://localstats.com.au/demographics/qld/brisbane/brisbane-city/newstead)

III. Pros and Cons of Investing in Commercial Real Estate

Investing in commercial real estate is always a proven method of generating wealth. Big investors and businessman plunge themselves into great deals and purchase space for office, warehouses, retail shops and other business. But while investing in such property, thorough research is necessary to understand the market trends. It will help to obtain the best deals with a higher number of benefits without any risks. Moreover, it will help to figure out where you would like to put your money in the individual organizations that specialize in commercial properties.

That’s why moving forward with a thorough understanding of the entire process will help to make the right decisions towards working deals. So, in order to make a wise and well-informed decision, it is important to understand the pros and cons of investing in commercial properties. This write-up will give wide detail on this discussion. Let’s have a look:

Pros to Invest in Commercial Real Estate

Here are the following reasons for buying commercial real estate.

Stable, Fairly, High Potential ROI:

The top advantage of investing in commercial real estate is high potential ROI. Generally, commercial properties offer a greater annual rate of return in the range of 6-12%, which is much better than others. If the location and condition are good, it can even be 12-14 per cent. The income from commercial property is usually regular and consistent as compared to a residential one.

Property Appreciation:

A well-located commercial property often provides a large amount and appreciate over time. New developments increase the value of the property. Moving businesses to the town can generate housing and retail demands for your property. All these things will give a high income.

Professional Relationships:

While owning the commercial property, businessman protect and operate the property under LLC. This will typically keep all things easier, simple, and more professional with tenants. These business-to-business customer relationships help keep interactions professional and courteous.

Triple Net Leases:

The overall concept of triple net leases is about to do not have to pay any expenses for the property as a property owner. It includes Property Insurance, Real Estate Taxes and Common Area Maintenance (CAM). It means the lessee will handle all property expenses, including real estate taxes. And, an investor will pay only for their mortgage expenses. Many large business entrepreneurs typically sign these types of leases in order to maintain a look and feel in keeping with their brand. Therefore, the owners will manage the cost and an investor has one of the lowest maintenance income producers for his/her money.

Accurate Cost Evaluation:

In regards to evaluate the commercial property price, an investor can request the current owner’s income statement and determine what the price should be based on that. If any owner is selling the property under a knowledgeable agent, then the asking price should be set according to the market price where an investor can earn a huge amount of profit.

Cons to Invest in Commercial Real Estate

Here are the following issues generated while investing in commercial real estate:

Heavy Investment

Acquiring a commercial property typically requires a much larger up-front investment, which is a bit harder to break into the market. Along with this initial capital, an investor can expect for large pocket expenses throughout the course of ownership, including the roof and electrical repairing, or other costly expenses. With more customers, an investor needs to maintain all the services accordingly, which in return reach high costs.

Sensitive to Economic Conditions

With the commercial real estate market continuing to boom, it is difficult to find a commercial property where the numbers all make sense. Businesses flourish and demand for commercial properties generally rises when the economy is strong. But when there is an economic downturn, demand for commercial premises usually falls.

Values Can Drop Sharply

The value of commercial properties closely interconnected with the lease on the property. If the lease is about to expire, or commercial property becomes vacant, then the value of the property would generally fall.

Costlier Loans:

The loans for commercial property are higher than the residential property. It includes the interest rates and terms & conditions, which all depends on the kind of property, investors’ profile, location and the tenure of repayment. The availability of the loan is more complex as it takes longer time to sanction it.

Zoning

Commercial properties are more strictly prepared with specific space and regulated than residential properties. If a property is zoned for a particular use, for example, manufacturing,

and the owner wants to rent it to someone who has another use in mind, then zoning area of the room will affect the performance of the business. This leads to an increase in the cost and limits the number of uses to which the owner can put his/he building. The strictness and complexity of zoning regulations vary widely between municipalities, which generate low sales.

Greater Risks

The commercial real estate requires regular investments in the repair and modernization of service communications. If you do not make any repairs, then greater risk of a slip and fall, property damage, or other liabilities. This will increase the cost of insurance and could affect your bottom line. Certain properties also require specific types of additional insurance. So, an investor should always be aware of depreciation costs, so replacing failed equipment should be a scheduled event, not an unpleasant surprise.

Overall Takeaway

The above-mentioned pros and cons will help you to make an informed decision over the choice of investing in commercial property. It is important to know all the nuances and pitfalls of this type of activity. With the help of a skilled and knowledgeable agent, an investor can make his/her process easy. If you want to increase your capital, investing in commercial real estate can be one of the best options. But it requires thorough research in regards to knowing the overall cost in the acquisition of the property, the taxes involved, the zonal laws and laws for renting out and the rental earning potential of that building or shop.

IV. Steps to Get Started with Commercial Real Estate Property Investment

If you are here, then you may be thinking about investing in the real estate market. And there is no doubt that you have come to the right place.

Real estate investing is a straightforward process, so don’t panic. The only thing that you need to do is stay patient as it will take some time to learn the various strategies of commercial real estate. So, to make your journey easy and to start your real estate portfolio on a solid ground, follow the tips below.

1. Keep a Record of All Your Finances

It is simple; you just need to keep track of your total income and similarly, enlist all your expenses. It will let you have an idea of how much cash you can invest.

However, don’t assume that you will not be able to invest if you only have a small amount of cash available. You can easily get a loan if you have a stable job, a regular income, and a solid employment history.

2. Get a Pre-approval

You can get a pre-approval through a trusted and experienced mortgage broker or a lender. However, if you are having any doubt regarding your financial ability to invest, then you must consult a broker before applying for pre-approval.

3. Be Sure About Your Goals

Goals are different from a real estate investor to another; so, set your goals along with a realistic deadline. A common mistake that you should avoid is setting up too high or unrealistic goals.

4. Know the Risks That You Can Bear

Your strategy will be dictated by your risk profile; so, be clear about the types of risks that you are willing to take. Understanding your attitude towards risks will let you create your perfect strategy.

5. Start Budgeting

Budgeting is the only way to make sure that you have maintained and are going to maintain a positive balance between your income and expenses. Budgeting not only lets you know where your money is going, but it also helps you create plans for bigger expenses.

6. Create an Investment Plan

You cannot purchase just anything in real estate. You need to create a plan for your purchases so that you get the growth and returns you are aiming for. Every purchase you make should make you stay in the game.

7. Follow the Latest Trends

Stay aware of the latest trends in the industry. There is no such thing as a one true method, the only thing that is going to help you succeed is staying in touch with the industry and understanding the risks.

8. Keep patience and stay focused

A common mistake that most commercial property buyers or house buyers make while investing in real-estate is getting emotional about the matter. Always remember that it is a rational decision not an emotional one.

Keep on learning and trying new strategies; you will surely get success.

V. What Is The Best Type Of Commercial Property To Invest In?

Have you ever walked through a major city and counted all the different commercial property types? There are gas stations, hotels, strip malls, apartment buildings, industrial buildings, municipal buildings, office buildings, funeral homes, churches, synagogues, cemeteries and more. Yes, cemeteries! Did you know that grave plots are sold by the inch? They are commercial real estate too. Commercial investment properties range in size from a small, single-story, 750-square-foot office building to the Sears Tower in Chicago that is 4.5 million square feet. There is no other investment that I know of that gives you four types of income over time: rental income, rental increases, appreciation and saving on your taxes with depreciation.

Which Commercial Properties Make The Best Investments?

Do you know what flex space is? It is just about the hottest, most in-demand commercial property type right now — and no, it is not space made for a yoga studio. It is a light industrial complex where each unit has a showroom on one side and an office on the other. Flex industrial spaces are some of the lowest-risk investment properties, and they stay full. Small businesses that occupy them almost always pay the rent, as it is affordable. These entrepreneurs have pride in their operations and keep their units clean and tidy.

Apartment buildings, also know has multifamily, also carry some of the lowest risk. As the population has grown and home prices have increased, renting is the only option for many

young people. Likewise, seniors often do not want the responsibility of maintaining a home and are becoming more attracted to renting. Multifamily vacancy nationally today is unusually low, at about 5%. The drawback is that multifamily is one of the most difficult commercial property types to manage. Renters in high-end complexes often have unrealistic expectations for maintenance and service. If someone’s toilet breaks on a Saturday and it is not repaired until the following Monday, the apartment complex will often get a bad review online. On Class C apartment complexes in working-class neighborhoods, property owners may have headaches with rent collections, domestic disturbances, eviction and property damage. It often takes a very strict, hands-on approach to manage these effectively.

Self-storage, which performs well during good and bad economic times, is an outstanding commercial property investment. What an easy business to run: no toilets to fix, walls to paint or carpets to replace. When one tenant moves out, all you do is sweep it out to make it ready for the next one. The downside is that a new self-storage complex could be built nearby and steal your tenants or force you to lower your rents.

And let’s not forget mobile home parks. As long as most of the tenants own their homes, these make for a great investment. With no buildings to repair, most of the upkeep is landscaping and light maintenance. Because people rent space for their homes, they take care of the premises and just about always pay the rent on time.

Here is an example of commercial property for lease in Newstead.

Ex: Corporate Office Ready To Go

Property Description

Surrounded by significant retail amenity, 5 Kyabra Street is a prominent site within Newstead and is within close proximity to Gasworks, James Street & the Emporium.

* 102m² A-grade office space + 24m² exclusive use balcony

* Open plan with 10 fully cabled workstations

* Large boardroom

* Private Kitchenette & bathroom/shower facilities

* Mixture of carpet & grid ceilings with polished concrete & exposed ceilings

* Abundance of natural light

* One car park included in rent

Want to know more about this property? Visit here for further details:

https://www.commercialproperty2sell.com.au/details/corporate-office-ready-to-go-84587.php

What Commercial Properties Are Not As Desirable To Invest In?

Single-tenant, single-use buildings like an auto dealership are the highest-risk commercial property investment. If the dealership goes out, you have 100% vacancy. And what other type of tenant could you find to occupy that space? In Albuquerque, New Mexico, I know of an old car dealership that has been turned into a restaurant, but this is unusual.

On the other hand, a single-credit tenant property with an AA credit rating has virtually no risk of failure. But these commercial property types have the lowest cap rates and are the most expensive. Even a four-unit commercial building is risky. If one tenant moves out, you could be facing 25% vacancy or more. The result could be the property running at a loss after loan payments. It is best to invest in an office or retail complex that has eight or more diverse tenants with some national names mixed in. Retail malls that are based on apparel anchor tenants are on the decline nationally because of the high demand for online sales. However, strip malls that have a balanced tenant mix between popular chains like dollar stores, restaurants and service business are doing well.

New Trends In Commercial Investment Properties

Here are a few newbie commercial property types that are winners: Did you know that micro-apartments command the second-highest rent per square foot of all multifamily properties? They are 240- to 500-square-foot urban dwellings that rent from an average of $1,200 to $3,500 per month, depending on location. Millennials love them because they are luxurious, and within easy walking distance of trendy boutique shops and fabulous eateries — perfect for a population not fixated on homebuying. Only student housing rented by the bed rents for more per square foot.

Co-working space has become popular in large metros. These often offer a choice of configurations, including large rooms with tables, open spaces filled with individually assigned desks or cubicles, and sectioned-off rooms that mimic traditional offices. Many remote and freelance workers find these spaces attractive for regular or periodic work. Fees range from $75 to $400 per month. This property type garners the highest price per square foot of all office properties.

For those who are retired and want absolutely no headache, a triple net lease credit tenant property cannot be beat. They have national tenants with good credit ratings willing to pay the taxes and insurance and fix everything. Apartments are low-risk and a great way to get started, but if you are not the nagging type, this might not be the right property for you. Then think about self-storage, one of the easiest commercial property types to run with almost no maintenance. And it doesn’t get much better than investing in a flex industrial complex — that is, if you can find one for sale. So, how should a first-time commercial property investor choose a property type? Go with the option that fits you and your lifestyle.

VI. Ways to Get the Most From Commercial Property Ownership

As a business owner, there are many options open to you when it comes to office space. Depending on the size of your business and whether you just need offices or a manufacturing or storage space, you can choose to rent offices in a co-working space, rent an entire floor or building, or purchase a commercial property that suits your needs.

If you haven’t considered property ownership before, here’s what you should know to get started — and how to determine if property ownership is right for you.

1. Keep your operational business and property portfolio separate from one another

“Many business owners who own their premises have two separate companies,” explains Suraj Lallchand, director at Fedgroup Ventures, a division of Fedgroup. “The first is the original company that actually runs the operations, and the second is a ‘prop co’ that owns the property.”

The reasons for this are simple: There are tax benefits, it opens a second income stream, and it keeps the two entities separate, allowing the business owner to one day sell the business while maintaining the property portfolio they have built up. In many cases, if the business is

sold but remains in the premises, as the property owner they will continue to draw rental fees from the business.

For example, when Gil Oved and Ran Neu-Ner sold their business, The Creative Counsel, to international conglomerate Publicis in 2015, the deal didn’t include their building, which they own and from which the business still operates.

“We still own the building separately,” explains Gil. “Publicis Group are not in the business of property ownership, and the two businesses are entirely separate. You should always keep your property portfolio separate. If and when you sell your business, the buyer would probably not want a building as well. Furthermore, when you sell the business, you get to keep the building and hopefully get the new buyer to assume the lease agreement. Passive income is what we all aspire to.”

“It’s a simple process,” explains Suraj. “You would put the property into the prop co, take a loan against the property, and charge rent to the operations company. This then becomes a taxable deduction for the operational company, and the interest you pay on the loan for the building is deductible for the prop co. As a result, you bring your taxable income down to a minimal amount.

“We see many companies that would rather purchase their own properties and take the tax deductions than continue to rent.”

If you haven’t outgrown the first property but have paid off the loan, there’s an incentive to continue building your portfolio as well. “Once the first property is paid off, you can bond it again, purchase a second property, and continue to benefit from the tax deductions on the interest you pay on that loan,” explains Suraj.

The key to owning your own commercial property is whether or not the operations company can afford the rental and has strong prospects for the future. “If you can’t occupy the building and you don’t find a tenant, the prop co will end up defaulting on its loan and losing the property,” he adds.

“We always do our due diligence on the borrower and the property in question,” agrees Rick de Sousa, Head of Commercial Property Finance at Fedgroup. “The security we are lending against is determined by the value of the property as well as the owner’s ability to service the loan. If the owner of the business is purchasing the property, then the business’s stability and projected income is an important factor for us to consider.”

2. Take an objective view of the property you're looking to purchase

According to Rob Fenner, National Director of Corporate Solutions at JLL, which provides experienced commercial property and investment management services for corporations and investors, many business owners decide to purchase a property because they no longer want to pay rent to someone else.

“The irritation that owners feel paying off someone else’s asset is emotional. Choosing to purchase a property based on emotions instead of for financial or business reasons is a mistake,” he says. “You need to carefully consider all the factors around purchasing property before pulling the trigger.”

Rick agrees and believes that subjective decisions around purchasing commercial properties are a key reason why a business owner could end up investing in the wrong property. “Business owners don’t always look at property objectively,” he says.

“One of the most common scenarios we see is the business owner who has been renting for years, and now wants to purchase the property from their landlord. The problem is that they’ve already invested so much into the building that they’re stuck.

“They think the property is worth more than it is, and the landlord knows the business is anchored there, which works to their advantage because it drives up the price. In these cases, objectivity becomes a problem.”

Rick’s advice is straightforward. Instead of just making an offer to your landlord, consider the pros and cons of the property you’re in and why you want to purchase it. “You obviously ended up in that property for a reason and that’s why you want to buy it, but that could be more of an emotional attachment than a strong economic or business reason to stay where you are,” he says.

Over and above which property to purchase is the overriding question of whether you should be investing in property at all.

“Investing capital in your premises is something a business should look at only if they believe that the capital is of better use in the commercial property market than invested in whatever their core competency is,” says Rob. “Whether this is the case is a function of where the commercial real estate market is likely to go, and how much disposable income they have on their balance sheet.”

“We made the decision to move away from renting office space and to build our own premises for two key reasons,” explains Gil.

“The nature of our business means that we have very specific requirements. We wanted a place big enough that all the various entities within the group could be housed in a single location.

This meant we needed large warehousing facilities, but because we entertain clients, we also needed our offices to be in a convenient location for them to visit. Large warehousing facilities generally don’t exist in upmarket areas. We needed to build what we wanted.

“However, even though we knew exactly why we were making the decision, it was still a risk. We decided to back ourselves, but it’s not a decision to be taken lightly. The outcome for us has been positive, but in hindsight, a smaller outlay to begin with would probably have been a more prudent approach.”

3. Get as much information on the property and the area as possible

What many first-time property buyers don’t realise is how much information is available to them. “There is no excuse for not having the information you need when considering a property or area,” says Rick. “As a layman, I can sign up on sites like Lightstone Property, pay my R70 and have a full view of the area I’m looking at, property values and a history of commercial businesses in that suburb.”

Fedgroup always recommends that serious property buyers use the services of valuers. “There’s a lot publicly available, but professional valuation firms have so much more data.

“When the valuation comes back we get a deep understanding of the property. It takes into account macro-economic factors, the area, suburb trends, national trends, and a thousand other data points, including capitalisation rate to yields on the rent, average vacancy rates, the highest rates you can get in that area, average rates you get, price per square metre — anything and everything you need to determine whether this is a good investment or not.

“The more information you have, the more you’re de-risking the purchase. If a buyer wants a loan on the property, they’re going to need a valuation anyway, and that’s done on risk — it’s necessary for the application, whether the loan is granted or not — so why not get it done upfront?

“This one report is everything you need. You can then determine if you’re looking at the right property, or if there’s something better in the area.

“What’s a R10 000 valuation compared to over-spending by R2 million? The key to buying property is to always have as much information available as possible. Too many people walk onto a premises, fall in love and purchase — without looking at the business case.

“Business owners should take a leaf out of the playbook of property owners whose sole focus is their property portfolio. They’re never subjective. Properties are their business — not premises they will occupy themselves.

“It’s this fact that often skews the purchase for business owners. One of our clients who is purely in the business of investing in properties was recently reviewing a boutique hotel in the Cape.

“He loved it and thought the valuation of R40 million was reasonable. Our valuation was R33 million, but there was an operational hotel and vineyard on the property, and he accepted the premium based on that benefit.

“What he didn’t know was that 20km down the road a big conglomerate was selling their hotel. It was ten times the size for the same amount of money. From a pure investment perspective, this was the better deal, with a much bigger return.

“If he wanted to purchase the boutique hotel to live on the estate and run it, that would be a different discussion — but he’s an investor, and the valuation gave him the vital information he needed to make the most informed decision on where to buy.”

This is even more important for business owners whose core focus isn’t property investments. “Taking advice from a trusted consultant is critical,” says Rob. “Many CEOs and CFOs aren’t experts in the field, and yet they need to make decisions that will result in a large capital outlay and subsequent servicing of an even larger loan. Get expert advice.

“Commercial property brokers, valuators and property finance companies can give you insights that you don’t have. Many real estate consultants in our market are highly skilled and more like management consultants than property brokers.

“Forming a relationship with one of these individuals can make sure your real estate decisions are backed by strong metrics and not done on a whim.”

4. Determine if the time is right to buy

According to Rick, there is a completely different level of responsibility involved when you purchase premises compared to rent. “It’s a good example of risk and return,” he says.

“Your risks increase, and it becomes your responsibility to ensure the building is maintained, rates and taxes are being paid, security, insurance, health and safety — you no longer have a landlord taking care of any of these things — but the returns should be commensurate with that risk.”

Rick’s advice is that you ensure the yield of the property makes sense. “Property has proven to outperform inflation. It’s generally in the high teens. In addition, commercial property is pretty predictable when it comes to rentals as well.

“Before you consider whether to buy, you need to take multiple factors into account,” adds Suraj. “There’s work involved in owning a property — is it worth it for you?”

Gil agrees. When he and his business partner, Ran, built their property, it took three times longer than expected. “There is a great upside in the long run but building and owning a building can also be a massive distraction from the business itself,” he explains.

“It’s also a massive long-term commitment and cyclicality in businesses is variable, whereas paying rent is stable and escalating in a predictable way annually. With a rental agreement you may only be in for three to five years. When you own, you commit for much longer.”

It’s this factor that Suraj believes prospective buyers should pay particular attention to. “You need to consider your five- to ten-year plan,” he advises. “For example, if you know you’re growing, it might be better to rent until you need a bigger property.”

He also warns that cash flow is critical. “Pay attention to interest rates,” he says. “As interest rates go down, it makes more sense to buy. But what happens if the interest rates go up?

“These are long-term decisions,” agrees Rick. “If you know you’re going to grow, now might not be the time to buy — stay renting. You also need to find the right place with a long-term view of where it’s going.

“You could choose an up-and-coming area or an already established area — but either way, location is important. This is another area where valuation experts are critical because they don’t only look at the property, but the entire area.

“Either way though, if you do choose to buy, the returns you get from the business (or from a tenant) need to exceed the bond rate. You must be making more than 10% in profit for this to make sense. Otherwise you just slowly erode your business.”

5. Consider other revenue streams property ownership could bring

Once you own a building, there are a number of smart ways to monetise the property. “These are negligible when you’re considering buying, but after you’ve bought the property, you can be smart about how you use it,” says Rick.

“There are many ways you can bring additional revenue streams into the business through the property,” adds Suraj. “We offer a grid-tied solar opportunity, for example, that allows commercial and industrial property owners to monetise their roof space.

“You can also rent out any unused space, particularly if you’ve bought a bigger property than you need to accommodate future growth. You can also reach out to cell-phone providers — do they need a tower in the area?

“Would they like to erect it on your property? Are you well positioned to offer billboard advertising, or building wraps? “There are a lot of different things you can bring together.

“This is often what investors do better than business owners who only have one property — their premises. Investors are in the game of looking for income streams, and because they’re in the business of buying and managing properties, they get good at it.”

VII. Conclusion:

Real estate investing can be a great way to boost your portfolio and quickly get you to financial independence. The barrier to entry feels high, and that scares off many would-be investors.

If this is you, don’t worry. This Guide will help you to getting started in real estate investing.

VIII. References:

Commercial Real Estate Specialty Property Types| Thebalancesmb. Retrieved from 20 May, 2020

https://www.thebalancesmb.com/commercial-real-estate-specialty-property-types-2866570

Pros and Cons of Investing in Commercial Real Estate| Investmentpedia. Retrieved from 20 May, 2020

https://www.investmentpedia.org/investing-in-commercial-property/

Steps to Get Started with Commercial Real Estate Property Investment| Businesstown. Retrieved from 20 May, 2020

https://businesstown.com/8-steps-get-started-commercial-real-estate-property-investment/

What Is The Best Type Of Commercial Property To Invest In?| Forbes. Retrieved from 20 May, 2020

https://www.forbes.com/sites/forbesrealestatecouncil/2019/08/02/what-is-the-best-type-of-commercial-property-to-invest-in/

Ways to Get the Most From Commercial Property Ownership| Entrepreneur. Retrieved from 20 May, 2020

https://www.entrepreneur.com/article/328794