Commercial property such as shops and offices as well as industrial property like factories and warehouses can be good investment options but you certainly need some professional guidance when buying.
Commercial and industrial properties are higher risk compared to investing in flats and townhouses.
This is mainly because they tend to be expensive single-tenant properties.
Investors in this market need to have a risk appetite and be able to pay expensive prices even if their properties stand vacant for long periods of time.
The reason for this is that while the market is active, commercial and industrial properties are in demand but when the market changes the demand also drops and may take a bit of time to pick up.
Whether or not you have a tenant you still need to pay rates and taxes, insurance and maintenance fees.
And because such properties are often in isolated areas, the risk of break-ins is much higher than in a normal suburb.
If you have your own business you will need a business property to run from – many potential clients would not be prepared to work with you if you are working from home.
This means you will need to decide whether to buy or rent.
While buying is the best option in the medium term, renting is better if you are a young and growing company.
And when the business grows, you will need more space and that could be the right time to consider buying.
But if you are an established company, buying the right business property is a better solution.
Platinum Global bought its offices in Zastron Street in 1987 for R50 000. This was very expensive at that time and we spent another R50 000 on upgrading the property. In those days Zastron Street was a dirt road!
Over the years we have paid off our bond and we are now staying there cost-free.
That makes a huge difference to a business and takes away the risk when times are tough.
Importantly, if and when we decide to sell the building, it means we already have a large sum of money to put into the next property that we buy.
Commercial and industrial buying and renting needs to be done together with a knowledgeable estate agent, one with lots of experience that can help you avoid making basic mistakes like buying in the wrong area or overpriced property.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant.