In commercial or retail real-estate investment, wherever and whenever possible, formulate your tenancy, lease, and monetary decisions with a bias towards adding value to the investment. Consider the decisions you make ‘strategically’ to support the investment over time.
It doesn’t matter whether you own an office or retail property, every decision you make is critical to the investment over time. In every decision, consider how you can enhance or improve net income and/or capital value.
The property market changes throughout the year in Melbourne, as do rents, prices, occupancy costs, and vacancy factors. Look at supply and demand in the sectors you are investing in, and in your preferred suburbs. As an owner of an investment property, you need to think about how to improve the property’s income, occupancy, or capital value.
Here are some common examples of strategic decisions made for commercial and retail property today. Some of these factors may impact your property investments, tenants, or income opportunities in Melbourne.
1. Selection of tenant
Don’t be too quick to accept any new tenant into your property simply to fill a vacancy. Understand the tenant and their business history as you consider the details of the offer of lease. Look at everything in balance with the tenant’s offer, and particularly the stability of the business over time. The logic here is to position the best tenant into the property given the surrounding tenants in the mix.
2. Lease documentation
Many property investors fail to concentrate on the quality of lease documentation used in their asset. Any professional property investor should spend time with their legal advisors at an early stage to structure a standard lease document to suit the investment, the property market, and the required cash flow targets. Any property with several tenants in occupancy, supported by well-crafted lease documentation, will be eminently more saleable to another investor when the time for property sale and disposal arises.
3. Maintenance costs
When spending money in the common areas of the property, look at how a visual enhancement or property reconfiguration can improve the opportunity for more lettable space and or other tenants. Is one thing to maintain a property; it is another to improve it through strategic property changes and upgrades.
4. Capital purchases
Most commercial and retail investment properties will require reasonable capital expenditure over time on larger items of plant and equipment, property upgrade, and renovation. Plan your capital expenditure to a budget over a period of five years. In that way, you can instigate the larger maintenance projects when cash flow and time permits.
5. Professional property management services
Most property investors do not have the time and/or the required knowledge to manage and lease their asset professionally to achieve the best outcomes. While a professional property manager will always be a cost to the property, that cost should be recoverable through property outgoings as nominated in the standard lease for the asset. That single strategy thereby releases the owner from the stresses of day-to-day management and cash flow stability. It then allows the investor to concentrate on the bigger picture of budgets, tenant placements, and net income.
So the message here is that a property investor in Melbourne today should concentrate on the bigger picture for their asset, and formulate most of the decisions based on adding value strategically to the property over time. Allow your property investment to improve and grow by carefully managing tenancy mix, cash flow, and capital value.
For more information contact Melbourne Acquisitions.
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