Commercial property expert Ben Kodisang boasts two decades of insights that you must know to avoid the pitfalls many inexperienced investors make.
Not all commercial properties are built equal and to ensure that you find the right building in the right market, you need insight. Most commercial real estate owners spend money renovating their properties too. If you spend money improving the look and feel of a building and then, because of a lack of knowledge in real estate, realise you bought the wrong building in the wrong market, you would have wasted your capital as you might not be able to find interested tenants.
This leaves you in compromising position – either sell or continue absorbing costs?
According to property expert Ben Kodisang, if you invest in property, you must know what to look for and what to avoid, otherwise you could purchase an already underperforming commercial property that takes several years to recoup an investment from.
Related: The 3 best commercial properties for first-time investors
Although Gauteng continues to dominate the commercial property market, investors are branching into smaller cities in the Free State, Mpumalanga, Limpopo and the North West Province according to JLL’s report: Commercial Real Estate Transaction Review: South Africa. The report also reveals that investors are focusing on office (70.7%), retail (47.8%) and industrial (22.2%) properties.
Here are two of Ben Kodisang’s top property investment tips and tricks for first-time property investors:
1. Undertake due diligence
You must ensure that you research exactly which type of market you want to cater for and what type of property you want to buy. You’ll need to make this distinction because not just any building will work for any business, and then the right type of building could be in the wrong location for the tenants that you’re trying to find.
“Property is about detail and about conscious evolution. Always do your homework with property investments. Although we are experiencing headwinds in terms of slowing growth, volatile currencies and low interest rates, we continue to see real demand for real assets,” Kodisang says.
Approach each property, for example a factory, and ask yourself what kind of company would thrive here, in this location; or whether your investment is better off in a shopping centre or office block. Is the location near a highway for ease of deliveries for specific businesses I’m looking to attract? If you know which business sectors are doing well and in need of space, it’s a good reference point to start exploring locations from.
Related: 3 Money-making lessons you need to know from a seasoned property dynamo
2. Diversify your investments
Kodisang says that when you’re acquiring your first properties, keep in mind that different business sectors will do better during economic cycles. For example, retail usually does better during the holiday months compared to the beginning of the year. By having multiple types of properties, locations, tenants and industries, you can mitigate risk, should one market be under pressure. As you grow in the future, this becomes even more important.
“We acquired properties, bought property companies such as Marriott and developed a lot of our properties to make them relevant and attractive to tenants. We also diversified our property portfolio to other geographies such as Namibia, Saudi Arabia and India,” adds Kodisang.
While you might have access to limited capital now, while starting up as a property tycoon, diversifying your property portfolio must remain top of mind and in your long-view strategy. South Africa’s manufacturing sector, although under pressure, remains on track for growth in the future, which means greater demand for industrial properties. Similarly, transport and logistics businesses are growing in number, and depots and warehousing properties can enable you to cultivate your wealth.
It’s important that you ensure you invest in the right kind of property for the market that you’re interested in. Otherwise you could end up making a bad investment, and lose all or at least some of your initial capital investment.
Featured image credited to: sphereholdings.co.za
- Due diligence will ensure you buy the right property for the right industry and that it offers all the aspects that industry needs as essentials.
- Diversifying your property types at a later stage will allow you to spread your risk over multiple sectors, which will mitigate losses should one sector go through a downturn, according to property veteran Ben Kodisang.