This is a question a large number of both experienced and entry-level commercial investment purchasers ponder when taking the steps toward buying their next investment property.
There are a number of things that need to be considered before looking to buy commercial property and these are essential in ensuring your commercial real estate journey is as smooth and effective as it possibly can be.
Legal Representation
Ensuring that your lawyer or conveyancer is either specialised or well experienced in dealing with commercial property transactions, ideally with experience in both the sale and leasing fronts.
Awareness of the transaction type
Is the property you are buying currently leased or vacant?
Whilst you may think this doesn’t matter in commercial property transactions and depending on the GST statuses of the parties involved, you will have GST implications if the property is vacant. This would mean that your $600,000 purchase is now $660,000 plus all of your additional fees!
Are you investing or occupying?
Are you buying to invest or buying to occupy the property?
Your buyer search will be dependent on your desired result. If you are looking to invest you will likely need to look for properties with a lease in place or properties that would be appealing to the commercial leasing market. Your First National Commercial Neilson Partners real estate agent will be able to provide you with advice on the property's leasing viability.
If you are looking for properties to occupy or value add to, you will typically need to search for properties that are either vacant or with tenancies that are on short-term leases or expiring (with no options to renew).
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Leases
One of the more critical yet misunderstood components of commercial sales transactions is the power leases play in them.
In residential real estate a lease is a mere hurdle depending on your buyer profile, though a commercial lease will typically be of longer tenure, up to 2-5 years plus options of further tenure beyond that. These cannot be cancelled or voided, and you must see the contract out in its full capacity including options.
This adds great benefit as an investor, but if you are looking to occupy a tenanted commercial property you may be waiting a number of years. You must also ensure that the lease and its clauses cover all commercially standard practices, including but not limited to:
- The payment of outgoings
- Make-good clauses and ongoing maintenance/refreshment
- Ensure your investment performs to its maximum potential
- Offers you protection for periods of vacancy
COMMERCIAL REAL ESTATE FOR SALE
Commercial sales contracts
If you are an experienced real estate buyer you will be aware that your sales contract comes with a cooling-off period when a contract is entered into.
Commercial sales contracts do not offer that same benefit and any contract you enter into does not have a cooling-off period, so always ensure you enter into a contract that is totally suitable for your buyer profile and intended future purposes.
Contact your friendly team at First National Commercial Neilson Partners who would love to be involved in your commercial property investment journey and welcome your call.
