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Should You Become a Commercial Property Landlord?

By Karyn Stroet

By definition, a commercial property could include retail, industrial, office, and mixed-use buildings.  Managing a commercial investment takes time and there are things you must know in order to manage buildings like these effectively.  We recommend carefully considering the pros and cons of investing in commercial property and conducting a thorough analysis of the risks and rewards before purchasing.

A strong attraction for investors is the income-earning potential of commercial real estate.  While a commercial property will likely require more initial outlay than a residential property, they can generate a higher annual return on investment.

Owning retail or office buildings will mean that your tenants are likely to be business owners, which generally makes it easy to maintain polite and professional working relationships.  Also, business owners who offer products or services to the general public are likely to keep their rented areas in good condition.

Like anything, the benefits of owning commercial rental properties can be offset with downsides, including the larger initial investment needed to purchase, and other ongoing costs and risks that need to be considered.

It’s important to remember that the number of people who regularly attend a building will directly impact the amount of maintenance and repair the building will ultimately require.  Managing property maintenance can be expensive and time-consuming, so you must consider the budget required for regular upkeep and repairs.

Just as the number of people in a building can increase maintenance costs, it can also increase the risk of workplace injury and the opportunity for people to intentionally damage buildings and grounds.  While purchasing quality insurance can provide protection, it may be necessary to litigate injury claims or other lawsuits.  Engaging an experienced property management team will ensure that risks are minimised and buildings are compliant with all legal obligations.

Tips for Commercial Property Landlords

If you’re keen to invest in commercial property, you’d be wise to make sure you start it right.  Here are a few tips for finding success as a commercial property landlord.

  • Engage an experienced management team.  Managing a commercial investment takes time and expertise.  Engaging the right team will ensure you maximise the value of your commercial asset.
  • Be Proactive About Maintenance.  Make sure to stay on top of maintenance and repairs so you can retain quality tenants for a longer time, and protect your property’s value.
  • Mitigate Risk.  Ensure your asset is compliant, especially where the health and safety of your tenants is concerned.
  • Accounting.  There are many accounting facets of commercial property management including cash flow and budgeting, outgoings audits, reconciliations and tenant accounts.   Engaging a commercial property management team with experience and state-of-the-art software will ensure all these areas are reported efficiently and on time.

Most commercial property landlords find the job challenging, with competing demands on their time; but the payoffs can make all the hard work worthwhile.  Ray White Commercial Bayside work closely with investors and can guide you through the process from sales to management, increasing long-term value and profitability to achieve the highest return on investment for owners.

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