Wannabe Commercial Property Investors

If you’re reading this, you’re interested in commercial property which is great! It’s better than residential (in my opinion).  Tenants sign up for longer periods.  They all want their business to prosper, so they should look after the place.  Here are a few key tips:

• Check if the real estate agent has an engineering report.If the structural integrity is less than 67% of building code your bank may not want to lend you the money.
   

• Lease documents will put you to sleep but, before you do anything, check the main terms.  The current rent.  The next renewal date – you should assume the tenant won’t renew. The next review date - when you’ll have a chance to hike the rent and increase the value of your property.
   

• Generally, you’ll need to fork out for repairs to the roof, the main structure and the exterior.  Check the outgoings clause in the lease to see if there are any other items that you cannot charge to the tenant.
   

• This may be hard to do but try and find out how well each tenant is doing.  The bottom line is to request the rent payment history for each tenant to see who is in arrears or has a poor payment record.  There can be a big hit if a tenant goes insolvent leaving you to replace them.
   

• You will of course check out the location and the likely appeal for certain types of business in case you do one day have to find a new tenant.  As an example, the photo shows two units for sale up the road from our offices at 213a Waimairi Road, Ilam in Christchurch being marketed by NAI Harcourts.  It’s on a busy parade with plenty of parking, lots of foot traffic so time to find a new tenant should be minimal.

Of course there are lots of other points to cover off when you go to see your lawyer (which we would recommend you do before you sign anything!).  Come in for a chat and a coffee if you have any questions.

The above information is of a general nature only. You should contact our firm for advice relating to your specific circumstances.