Real estate could be an ideal investment opportunity for small business owners, or corporate professionals, looking to grow their wealth.
Putting money away for the future is wise, but, why not make your savings work for you?
“Traditional savings vehicles may not always be the best option for small and medium enterprises (SMEs), says Jeremy Lang, regional general manager at Business Partners Limited.
He believes investing your capital for growth can be more profitable than having it collect in a savings account.
But where do you invest? Lang says that in challenging economic climates, property investments remain a sound way to bolster your wealth.
Which properties should I look at?
According to Lang, industrial property remains a top performing sector with a return rate of 13.6%.
“Over the last 10 years, it has proven to be a relatively stable and resilient asset class in terms of generating positive returns,” he says. Commercial real estate, particularly in the industrial sector, therefore could offer you both monthly returns, along with capital appreciation.
Here are three things to consider when buying commercial real estate, to take you one step closer to becoming a wealthy property magnate:
1. Investigate and set a cap on how much you’re going to invest
It’s worthwhile to note early on that borrowing too much to finance it could put you in a challenging situation, despite the fact that you can generate an income from commercial property..
Property experts advise that you understand how much the potential investment is worth, and know how much you can viably spend on the property without risking your personal or business’ financial security.
Related: Trends to consider as a commercial real estate investor
The upkeep costs of the building could outweigh the amount of rent you could reasonably ask for, so ensure you do your due diligence before purchasing commercial real estate. Some additionally important considerations when selecting a commercial property to invest in include:
- Its business zoning rights
- If there are any future site development plans
- Whether there any restrictions listed on the title deed
2. Be prepared for ups and downs as a property owner
Every type of investment carries an element of risk, whether big or small.
According to Leon Breytenbach, national manager of the Rawson Property Group’s commercial division, the ‘risk’ with commercial property is the large capital contribution.
“There is no exact or predetermined timeframe within which an investor will be able to recoup his or her initial investment,” Breytenbach says.
3. Consider property your long-term wealth strategy
“A commercial property investor needs to be patient, as finding the right opportunity, entering into negotiations, renovating where necessary and entering into the purchase procedure will all take time, as will the achieving of worthwhile returns,” Breytenbach explains.
Related: Why you can’t buy a commercial property without looking at it first
He adds that if you’re looking to invest in an asset that will give you long-term stable returns, then commercial property could be the right investment opportunity.
“When deciding on your next course of action, consider getting professionals involved, know how much you can reasonably invest, understand the risks involved and be prepared to play the long investment game,” he adds.
Before investing in your first commercial property consider the following:
- Your borrowing cap, regardless of how much rental income you’re anticipating from the building.
- The time it will take you to recoup your investment may not be as soon as you’re expecting
- Property is a long-term investment to enter into commercial real estate ownership with a plan.