Last month we shared with you some great tips for selling commercial real estate in Brisbane. This week we bring you our quick tip guide to buying commercial real estate in Brisbane...
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If this is your first time investing in commercial real estate in Brisbane, keep in mind that securing a commercial real estate loan is more challenging than the residential market. When applying for a commercial real estate loan, banks or lending institutions will look a little harder and take more time analysing your application. Generally they will only lend up to 70% on average which means you are likely to need a larger deposit than what you would for a residential property. Ensure you (and your partners if you have them) are able to cover the large deposit required, and shop around to find the lender best suited to your needs.
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Make an educated decision as to which type of commercial property to buy in Brisbane
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Office suites in Brisbane return the lowest yield but are usually a safer investment in that tenants are more likely to sign a longer lease
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Retail spaces - location is super important when it comes to securing a tenant. If your shop is not easily accessible and in a high traffic location, tenants may not see much trade and thus may not be able to sustain the lease
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Industrial commercial real estate in Brisbane usually has a much higher return but the risk of vacancy is much higher
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If you are looking to invest in a retail space in a shopping centre, it’s advisable to purchase a space as close to the anchor tenant as possible. The anchor tenant is the largest shop in the centre and as such is the main draw card for shoppers visiting the centre. The closer you are to this space, the more traffic you will likely get in your door.
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If you are purchasing a commercial real estate property in Brisbane which contains more than one unit or shop, consider purchasing as many of those units/shops as you can afford. Doing so means your return on investment is likely to be much higher. In addition to this, if one unit is vacant you may still receive income from the other unit/s.
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It is strongly recommended to have some extra funds to act as a buffer for your loan repayments should your commercial investment property experience any long term vacancy.
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Organise building and/or pest inspections: purchasing commercial real estate in Brisbane is a big investment. If you are renting the property out, you will be responsible for any issues relating to the structure of the building, so why not gain peace of mind prior to purchase knowing there are no serious structural flaws in existence and that the building complies with commercial building regulations. It is a good idea to organise a building and pest inspection before signing contracts, and we recommend you pick an organisation who specialise in commercial property inspections.
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In addition to building and pest inspection reports, consider including a due diligence clause into your contract. This would allow you adequate time and permission to make enquiries into any issues which might impact on the value of the commercial property you are considering purchasing. Issues could include: compliance with planning laws, status of lease and tenancies if the building is tenanted and possible contamination of the property or surrounding land.
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If you and the vendor make an agreement around any issue with the property or any special conditions relating to the sale, it is vital that this is written into the purchase contract. This is required by law and will protect you should any related issues arise in the future.
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Buying commercial real estate in Brisbane as an investment with the intention of leasing it out? Invest in a property management professional who has experience in the Brisbane commercial real estate market. They’ll take the stress away from you by vetting prospective tenants, determining a suitable lease which takes into account the location/building condition/utilities etc and negotiating the finer details (length of lease, refurbishments etc…).
If you would like expert advice and help with buying commercial real estate in Brisbane, get in touch with MMJ Real Estate Brisbane - we’re here to help!