9 Do's and Don'ts for a Successful Commercial Property in Noida with Assured Return

by Richa Malhotra Real State

Whenever anybody is willing to buy a commercial property in Noida successfully with an assured return, must has to do so keeping certain things in mind. These are nothing but certain factors that are essentially to be followed at the time of buying a business property. It is on the basis of this that below I have tried to enlist certain do’s and don’ts which would be highly beneficial for the commercial investing.

1. Mindset adjustment:

A ‘location-specific mindset’ can be the primary driver for a residential investment, but that is not always the case with commercial properties. Key factors to consider when purchasing a commercial property include the type of asset class, whether it’s fast food, childcare or government-tenanted; the strength of the tenant profile; and the lease term in place. In most cases, the longer the lease the more secure is the investment. The above three factors often rank higher than location, so it’s best to analyze and determine the outcome of each to ensure that the commercial property will be a successful investment.

2. Buyer’s education:

No one has too much knowledge of commercial property, and a great place to start is to familiarize oneself with an auction environment. Attending an auction can often develop the buyer’s understanding of commercial property fundamentals, from prices and yields to quality of the product and buyer interest as well. There are a large variety of commercial investments on offer, representing diverse income brackets and a broad geographical spread. They provide an instant snapshot of the market and the type of property you might like to invest in.

3. Portfolio diversification:

Like a share-market portfolio, a buyer requires to diversify a commercial property portfolio and that can really come with a string of benefits. Investing in different asset classes – for example medical, service station or liquor – and various geographical locations can minimize one’s risk as an investor. If one property doesn’t perform as well as forecast, investments in other asset classes may perform better than anticipated over the same period. Further, diversifying one’s commercial property portfolio means the person is not relying solely on one source of income.

4. Regional locations:

It is not mandatory to search only the major capital cities. Quality investment stock is often in short supply, so it’s important to not limit oneself. It is always suggested that we widen our net and research, and look at the merits of both metropolitan and regional locations. Some investors can become fixated on investing only in major capital cities; however, there are plenty of regional areas with equally strong growth prospects. If, like most, one is a yield-driven investor, he must keep an eye out for those regional properties that are leased to quality brand-name tenants, as one will find that they usually achieve more attractive returns.

5. Comparing similar likes:

Commercial yields tend to be quoted in net terms after all outgoings are deducted, while residential yields are often quoted in gross terms, ignoring outgoings, which is not accurate. In order to ascertain the true net income and avoid being misled, we encourage prospective purchasers to thoroughly research the financials as part of the due diligence process. It is worth noting that several commercial leases are structured in net terms, where the tenant pays all statutory outgoings, including insurance and land tax.

6. Not to commit until funds are in the bank:

A common mistake we have witnessed occurs when an investor relies on funds from the sale of one property to finance another property, and then commits to the purchase before these come through. There is a huge amount of risk associated with this activity, which is easily avoidable if you wait until the settlement occurs from one’s other property and the money is in the bank.

7. Not to buy without professional advice:

Seeking accountancy and legal advice before bidding at an auction would help one immensely in the buying process. Multiple times we have witnessed successful bidders who are unsure of the purchasing entities, results in frantic phone calls to lawyers during the sign-up stage. Ensuring that the purchasing entity is in place, for example a Self-Managed Super Fund, is something one should be well aware of before placing any bids.

8. Not to hold back on a blue-chip investment:

Naturally, prime blue-chip investments garner a lot of interest and inevitably plenty of competition. One should not hold back if it is truly a prime blue-chip asset, and accept that other parties will also fight hard to secure it. Remember that the reasons one likes the investment are no doubt the same as why others do, because it ticks most boxes of a successful commercial property investment.

9. Not to rely on the agent’s marketing material:

While agents’ marketing material, such as an Information Memorandum, usually provides an understanding of the key aspects of a commercial investment property, it is advisable that one carries out greater due diligence and request a Contract of Sale. This forms the legal basis of the sale and should therefore be reviewed by oneself and one’s solicitor to mitigate any potential risks of the investment on offer.

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Created on Feb 5th 2019 03:01. Viewed 483 times.

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