Investing in commercial property, if done correctly, can be extremely rewarding and an excellent long-term investment. However, there are several mistakes people commonly make when investing in commercial property.
At Prideview Properties, we’re committed commercial property agents in London, and we believe that our clients should be as informed as possible when making their investment. So here are some of the most common mistakes that are made when investing in commercial property.
Not Understanding the Market
When you’re investing in commercial property, it’s essential that you research the market first. A common mistake that many people make when investing in commercial property is that they fail to understand the market, both on a local and national scale.
By researching the market, both independently and with your advisor, you can observe, from a financial perspective, the investment potential of the commercial property. If you’re investing in a property containing an existing business, you can also understand how successful similar businesses are in the area, and whether or not you’ll be secure with the current tenants.
Not Understanding the Local Area
Just as understanding the local market is imperative to a successful commercial property investment, so too is understanding the local area in general. Unfortunately, failure to understand the local area is yet another major mistake that’s made by property investors.
When you research the local area, you’ll be made aware of any new developments that may benefit or threaten your investment, such as housing developments, transport links or large retail developments. By researching and understanding the local area, you can understand whether or not the business currently residing in the property, or one that would be ideally suited to the space if it’s vacant, would survive and prosper.
Failing to Secure Finances
A major mistake made by property investors is failing to secure their finances properly. This mistake can potentially ruin investors, and therefore it’s essential that all finances are secured definitively before proceeding with an investment.
If you’ve found your ideal investment property and you require a mortgage, it’s important that you speak to your bank as soon as possible so that your mortgage can be finalised before the purchase is completed.
When applying for your mortgage, make sure you can afford your repayments. This should be done in line with your agent’s estimation of your rental yield, however you should also take into account certain incidents such as:
- Tenants go out of business
- Property requires repairs
- Property remains vacant for an extended period of time
- You lose your job/main source of income
Although many of these incidents are unlikely to occur should you seek the correct professional advice, it’s best to ensure that you’re financially prepared for all the risks involved in property investment, as this gives you the best possible financial protection and prevents you from getting into debt and being unable to keep up with repayments.
Not Viewing the Premises
A key error made by many investors is not visiting the property yourself at least once. Although you may trust the word of your agent, friend, spouse or you decide the property doesn’t have to be viewed before you purchase it, it’s vital that you see the property yourself.
By viewing the property in person, you can get a real understanding of the size of your property, how well it’s being taken care of by the tenants, if there are any areas that need improvement and more generally feel more secure in your investment.
Ultimately, you’re investing in the property. It’s crucial that you ensure everyone contributing to the investment has viewed the premises in person before proceeding.
Failing to Get the Right Advice
The most common error commercial property investors make is not seeking the right advice before they make their investment.
By seeking professional advice, you can avoid making these errors that will increase the risk of your investment. If you’re considering investing in a commercial property, Prideview Properties can help you to make the right investment. For more information, contact us today by calling 0208 863 8680.