questions to ask your property agent before making that investment.
Commercial property is an excellent form of investment, and can be profited from in various ways. Today, we’re looking specifically into the potential of earning a stream of income from the rental of such property. As with any investment, you’ll want to empower yourself with adequate knowledge of what you’re diving into, before getting your feet wet.
Here is our compilation of the top five questions you should ask your property agent to ensure you get the best profit from your investment.
1. What types of commercial properties should I be looking into?
There are two broad categories of commercial property you can look into for good returns on rentals, namely Retail Space Real Estate Properties and Office Buildings / Complexes.
The first category includes individual buildings or premises used for stores, shops, and restaurants, while the latter will earn you income from the rental of space to office tenants. One important point to note regarding the pricing of office buildings and complexes, is that properties may be based on the value of the rental return on investment, and not the standard ‘area / size-based’ valuations.
In any case, you’ll want to consider the next few questions before considering if the price for the property quoted will earn you satisfied, long-term, rent-paying tenants.
2. Is the property situated in a commercially successful location?
Just because a piece of property is located in the Central Business District (CBD), or in a location with large crowds, doesn’t mean its tenants will necessarily see more potential customers / clients stop by their premise.
Ask about the facilities and attractions nearby, enquire about the people who regularly pass by the area, and observe the success of the other commercial entities located in the area. Know your target clientele, and think about whether their business would thrive in the location you’re considering.
3. What is the rental yield of this property?
If your purpose in investing in commercial property is to profit from rentals, you’ll need to know the rental yield of the property you’re looking to invest in. The higher the rental yield value, the more quickly your return on investment will be fully realised.
The rental yield can be easily measured with a simple mathematical calculation: Take the annual rent, divide it by the property value (purchase price of property) and multiply the figure by 100. This figure, in a percentage form represents your rental yield.
4. What is the condition of this property?
Bear in mind that commercial property, similar to residential property, is likely to have been revamped to appear presentable. This is well and good of course, so long as the touch-ups are not hiding any structural, wiring or plumbing problems underneath.
Be sure to ask your property agent for a list of any known problems with the property. You might even consider engaging your own site / land inspector to ensure the quality of the property before finally sealing the deal.
5. What is the value of the surrounding property?
Knowing the value of the property in the immediate vicinity will give you a good feel of the value of the deal on the table.
Of course, there will be times when you may wish to purchase a piece of property at a higher price if there are no better opportunities available at that time. This can be a sound investment strategy, as long as you’re confident of the profitability potential of your selected piece of property.
Need more answers?
Those were our tips for the top five questions you should ask your property agent when purchasing commercial property for rental income. For more information on making the right commercial property choices, speak with your property agent, or visit an online commercial property specialist such as www.CommercialGuru.com.sg.
Source: SG Yahoo News 30th May 2011