A lot of people have spent a lot of money buying and upgrading or changing commercial properties into residential units, especially in the major cities where residential property is scarce.
The biggest advantage of these sites is their central location which can mean that people who stay there are close to work and or varsity.
But I ask the question: is it worth the effort?
I mentor a number of young people who want to get into the property owning business and they bring me these projects to evaluate.
Firstly, the buildings usually lie in not very attractive areas.
Why would you want to own property in areas that other people are moving out of?
Secondly, they are inevitably old and poorly maintained buildings that were designed and built over 50 years ago.
They were designed as offices, workshops, factories and so forth.
Quite honestly I have not come across one yet, that could easily be converted to residential purposes.
They are just designed for a totally different purpose.
If you just want to make money and don’t care about these “converted” residential buildings and the people who will stay there, then I suppose that it would be okay.
The ones that I have looked at could never be converted to quality residential buildings.
I recall one that was housing 400 people, mainly students, but just looking at the plan I could see that it was not an approved building plan for residential purposes, although the seller swore that it was.
You cannot have residential units without proper facilities and cross ventilation.
The maintenance factor on these old buildings will kill any financially viable conversion.
As you can see, I am not a fan of these converted buildings, they simply don’t work.
What can be done is to provide new buildings designed as residential buildings be it apartments or student units.
It should be possible to buy these time-expired commercial and industrial buildings and demolish them.
The advantage here is the location close to work, but also the fact that many of them will not only have the right zoning but will have sufficient services so that you can start building right away.
There is no doubt that we should reuse these inner-city buildings provided you do your homework to ensure that the site is large enough and has the right zoning to do a cost-effective and affordable development for the location in which it is situated.
But be careful that the market you let to does not give you more problems than you intended.
Good management is essential to ensure that good buildings remain good buildings.
Allow the odd drug dealer in or other undesirable tenant, and your building will not last long.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant.
