Win with commercial property
VITAL: GET FUNDAMENTALS RIGHT – OR LOSE MONEY
Regularly research to stay informed of changing trends and vacancy rates.
The most lucrative commercial property investments in a sluggish economy are those that deliver both short- and long-term returns, but knowing what makes a good investment and understanding how to make that investment work for you are two very different beasts.
That’s according to High Street Auctions director Greg Dart, who said with monthly rentals that can run into millions of rands, potential earnings from correctly managed commercial real estate investments can be significant. But transitioning from owner to landlord requires a shift in mindset and a healthy dose of knowledge. “Being a successful commercial landlord is more than just collecting rent,” he said.
“The same principles apply across commercial sectors from warehouse facilities to community shopping centres. If you don’t get the fundamentals right, you’ll probably end up losing a lot more money than you might make from any rental income.”
Dart said for aspiring landlords, knowledge is king. He has a list of essential tips to set new commercial landlords on the road to profitable, problem-free property management:
1. Know your market: It’s not just about location, location, location anymore. Understand the specific needs and trends within your property’s sector (retail, office, industrial, etc.) Analyse competitor
offerings, rental rates and vacancy trends to set yourself apart – then stay market savvy!
Market fluctuations are inevitable. Regularly research your local market to stay informed about changing trends and vacancy rates, which will help you adjust your pricing strategy and maintain competitiveness. 2. Master the lease agreement: Hire a lawyer specialising in commercial leases to ensure you’re covered on rent terms, maintenance responsibilities, sub-letting clauses, and termination procedures.
A watertight lease agreement is your shield and sword. It should clearly detail every aspect of both parties’ responsibilities, legal obligations and occupancy periods, as well as contingencies should either party default.
3. Know the legal stuff: Familiarise yourself with local ordinances and national regulations to avoid costly legal headaches down the line. Invest in legal counsel to stay updated on legislative changes. Understanding your rights and responsibilities avoids costly legal disputes. 4. Tenant triage:
Your tenants are the lifeblood of your investment. Develop a thorough screening process that includes credit checks, reference verification and income verification.
Meticulously screen potential tenants and choose those who are both financially stable and align with your property’s image and long-term vision.
5. Maintenance marvel: Remember, unless you have signed a triple nett lease, you’re responsible for keeping every part of the property in tip-top shape.
Establish a proactive maintenance plan, budget for repairs and replacements, and respond promptly to tenant requests.
A well-maintained property attracts and retains quality tenants, but ensure that tenants also clearly understand their maintenance responsibilities. Keep relationships with reliable, reasonably-priced trade professionals. Regular property upkeep is crucial. 6. Be the communication
champion: Open communication is key to building strong tenant relationships. Establish clear communication channels, respond promptly to enquiries, and be available to address concerns. Building trust fosters longterm tenant loyalty and cuts vacancies. 7. Expect the
unexpected: Be prepared for unforeseen circumstances like natural disasters, tenant defaults, or equipment malfunctions. Having a contingency plan and emergency fund minimises disruptions. 8. Embrace technology:
Modern property management software streamlines tasks, automates rent collection, facilitates communication, and offers valuable data insights. Smart technology simplifies workloads and gains a competitive edge. 9. Network, Network, Network: Build relationships with other commercial landlords, industry professionals and tenant brokers. Networking opens doors to valuable knowledge, potential tenants, and collaboration opportunities.
Goal is to learn all the components of your business
10. The numbers game: Understand the financials. Calculate operating expenses, project income and factor in vacancy rates to ensure your investment generates sustainable returns. An accountant is a must.
11. Be adaptable: The commercial real estate landscape is constantly evolving. Stay informed about industry trends, adapt your strategies accordingly, and be prepared to make investments and adjustments to maintain your property’s competitiveness and profitability. 12. Be a responsible steward:
Be mindful of your environmental impact, support local businesses, and strive to create a positive and sustainable space for tenants and the surrounding community. 13. Ask the professionals:
The all-in-one solution for novice landlords is to appoint an experienced property management company. Once you fully understand the business you can take back the reins, but the most successful landlords surround themselves with trusted professionals, and believe in delegation.
Dart said becoming a successful commercial landlord starts with understanding the market to identify attributes that make properties good investments.
“As a new landlord your goal is to learn all the components of your business by building strong relationships, surrounding yourself with experienced professionals, continually expanding your knowledge base and using your existing property expertise along with input from your skilled advisers to make the best strategic decisions for the growth of your investment.”