Commercial property: what to look for when building a portfolio

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Commercial property

Commercial property can be a lucrative and worthwhile purchase to form part of a wider investment strategy. Having a good team to manage the admin side of things such as tenancies and your tax obligations is highly recommended, especially if you have no experience in the commercial market yourself. Read below for a few tips when you’re starting out in the commercial property scene.

If you’re buying a single office or two within a commercial building there is also incentive for you as a future landlord to seek out a building that has a good energy rating. In addition to being kind to the environment, a more sustainable commercial premises can save you money if you intend to offer tenants the option of a gross lease.

The best way to do this is to invest in an office that has an accredited NABERS (National Australian Built Environment Rating System) rating in the form of a BEEC (Building Energy Efficiency Certificate). There is an online national register where you can look up BEECs free of charge. Not only is an energy efficient building cheaper to run, but you can expect to charge a high rent and good marketability to prospective tenants.Also good to know, is that an energy efficient building has the ability to secure government tenants which often are sources of steady and long term income for you, the landlord.

Buying a property in order to rent it out to tenants is not the only choice when it comes to commercial property. Some people land bank as part of their portfolio. Land banking is when you purchase large blocks of undeveloped land and once approved for development, you sell it for a profit. In many instances people purchase through a land banking scheme, where you can get an option to purchase some through a developer. This can be a risky strategy for a novice as they are unregulated and scams are known within this type of investment. Therefore, if you like the idea of a set and forget type of commercial purchase, it might be better to consult with experts and do your own research as to where you could individually purchase land that could be developed in future and thus has a potential for capital gain. Supply and demand is the key to a purchase of this nature.

Wherever the property you purchase is located, be sure to check the relevant zoning and council requirements for the site it is on. Your future intended use may not be currently permitted or building code certificates may not be up to standard. In the long run, oversights in areas such as these will cost you more money.

Unlike residential owner-occupier homes, the set of criteria you should have to select the right commercial property for sale is vastly different. Instead of what is aesthetically appealing to you in your opinion, try to imagine what future tenants will most likely value. This will mean longer term tenants and higher rental yield.