Investing in commercial property, whether it’s for your own business, or to rent to someone else’s, is not always straightforward. There are several pitfalls into which many first-time investors fall. Indeed, there are several which entrepreneurs fall into again and again!
If you’re considering making this significant step, then it’s worth apprising yourself of the common mistakes, in order that you don’t fall into them yourself. Let’s consider some of the biggest.
Poor Footfall
Businesses like shops, cafés and pubs are reliant on customers being able to walk in. Thus potential footfall plays an enormous role in the value of the property. Often decisions to visit an establishment will be taken entirely on impulse. Moreover, every time a would-be customer walks past a premises, they’ll receive a small reminder that the premises exists. Depending on the quality of the frontage, this message may be received loud and clear.
Naturally, the more customers walk past, the better for the business concerned. A gift shop located at the exit of a museum is naturally going to pull in vastly more foot-traffic than one located in the middle of nowhere. For such businesses, location matters perhaps more than any other consideration.
But even businesses which aren’t directly reliant on footfall will appreciate the value of location. Industrial estates, where several businesses share a space that’s within easy reach of transport infrastructure, fit this criteria just as neatly.
Failing to Factor in Additional Costs
Property is not just a list of numbers on a page. It’s a real, physical premises that will require investment to maintain – or to lift to a saleable standard. Older buildings may require extensive rewiring, piping and other remodelling. Ideally, you’ll want to make yourself aware of these requirements before you make the investment. That’s where bringing in a surveyor in can prove invaluable.
Businesses which fail to account for all of this may find themselves with a liquidity problem in the short term. If this can’t be avoided altogether, it can be at least mitigated with the help of a merchant cash advance. These come courtesy of smaller online lenders, regulated by the FCA, and paid for by interest.
Falling in Love with the Property
If emotion is allowed to colour your decision-making, then you might find that you’re dragged into purchases that you wouldn’t otherwise make. We’ve all at some point become infatuated with a would-be purchase, whether it’s a new television or a new shopping complex. In residential property, this is a problem. But in commercial property, it’s an even bigger problem, as the look and feel of the surroundings will matter far less than the cold, hard numbers involved.
Unfortunately, getting a grip on emotional spending isn’t quite so easy. There are several strategies you might employ, however. The first is to justify your purchasing decisions to some disinterested person. This is where having a business partner who’s willing to say ‘no’ can prove invaluable – in time, you may come to see the wisdom of their advice!
