Key Features to Look for in Selecting a Commercial or Industrial Investment Property
In Brisbane there are many zones or locations where you can select an investment property. In doing that it is wise to have your checklist of key issues to review before you make the final purchase decision.
Here are some ideas to help you in finding the right property in Brisbane for your investment portfolio:
Method of Construction
The type of building will have an impact on the method and type of construction. Typically industrial buildings are constructed of steel, iron, and concrete. Get an engineer to help you with reviewing the integrity of the building(s) so that you are not purchasing a costly asset that needs many repairs.
Depreciation Schedule – From a taxation perspective the depreciation schedule can bring you some real advantages taking into account the purchases of a capital nature in the property over recent time. The depreciation schedule can lessen the income for the property and therefore the impact on your investment taxation obligations.
Orders and Notices
Always check out the orders and notices that may apply to a property before you make the final purchase decision. Whilst there are obligations of disclosure on the owners of the property to tell you about existing orders and notices on the property, the real question is whether those issues have an impact on your investment over time.
Check out the zoning plans for the property and or the area where you are considering a purchase. Local zoning plans will tell you what you can do with the property, and therefore you will know the types of businesses that can occupy as tenants.
As Built Drawings
The construction or ‘as built drawings’ for the property will help you and your engineer understand important constructional issues such as structure, load bearing areas, locations of improvements, lighting, drainage, floor plates, plant and equipment, hydraulic, and electricity. Get the drawings reviewed by an engineer before you make the purchase decision.
The engineers report is a valuable tool in understanding just what your risks and costs could be involved in a property purchase. If items are identified as needing replacement then you can get a quantity surveyor to do cost estimates and predictions of those replacements.
Outgoings and Rates and Taxes
The outgoings for a property should be within the averages of occupancy costs for the area and the property type. As part of that analysis take a look at the outgoings as they have applied over the years to the property. You will see trends to check and analyse if you have a look at the outgoings costs for the property over the last few years. Pay special attention to the rates and taxes as they will have a large impact on property expenditure and will need to be paid at regular times of the year. It is not unusual for rates and taxes to consume approximately 30% of property operating costs and expenses.
Income and Expenditure
Look at the rental and outgoings recoveries being paid by each tenant. Are they in keeping with the lease terms and conditions? A due diligence process prior to sale and settlement will help you in checking those things off. Does the property have an outgoings budget? If so, check out the budget against actual costs and charges. When any questions arise about the property budget, ask plenty of direct and specific questions. Understand the property cash flow before you sign the contract.
Construction Certificates of Classification
In Brisbane the City Council requires the display of the building Certificate of Classification at the premises. You should get a copy of the certificate to understand just what is allowed to occur in the premises.
Understand the broader location from an investment perspective. Review the local transport, roads, ports, airports, and anything else that would be important for a property owner, tenant, or business proprietor. Convenience of use together with the correct services and amenities will enhance an investment property.
Proximity and Aspect – Look at the property from the locality perspective beyond the borders of the property boundary. Understand the frontage, plot size, land size, slope, and topography.
Most investment properties today require a car park that effectively services both tenants and customers. To do that you need plenty of land around the constructed improvements and the access points to get in and out of the property efficiently and directly.
Neighbouring businesses can have an impact that extends beyond the boundaries of their property. Look for issues of traffic, parking, noise, dust, image, and access.
Fencing and Security
The property that you are considering for purchase should have its boundaries checked against recent surveys. As part of that process look at the condition of the fencing and how it services the property and the occupants. Today there is a big focus on security when it comes to occupying premises.
Leases and the Tenant Mix
A good investment property is supported by the tenant mix and the leases. Whilst you may be given a tenancy schedule for the property that you are considering purchasing, check out the leases comprehensively as some lease clauses and terms and conditions can be quite onerous from an investment perspective. Review the leases including the rent reviews, options, permitted uses, expiry dates, and rental structures and outgoings recoveries. Also focus on make good provisions and any obligations that may be imposed on the landlord as part of running the property for the tenant.
So there are plenty of things that you can do here as an investor in reviewing a commercial or industrial property before you purchase it. If you need help with your selection of properties for investment in Brisbane, give us a call on (61) 7 33315444 or contact us at the website www.raywhiteindustrialmilton.com