Commercial property, like any other investment, requires a lot of research and knowledge in order to be successful. This is especially true when it comes to first-time buyers.
And the reason is simple: you’re playing with big money, big potential, and big risks. Without due diligence and wise investing, instead of maximising your return and minimising your risk, you might lose it all. Don’t let that happen. Buying a residential property for renovation and disposal or sale is the most common form of property development undertaken by individuals. When properly designed and implemented with the right property development finance in place, property can produce great yield.
Without wanting to state the obvious, key to success is, of course, is to ensure that the total amount you pay to purchase and improve the property (for example, making smart layout changes, updating fixtures and fittings, and restoring outdoor areas) is significantly lower than the figure you expect to receive when your fully renovated property is sold.
Get The Basics Right
- The location of a property is everything – you can absolutely find the worst house possible on the best street possible, and if this is the case, then get those renovations started!
- Each property has a ceiling value (a maximum amount that is likely to be on the market) it’s a good idea to stick with renovating what you need to, try not to get carried away with over the top luxury upgrades.
- Cheaper materials are unlikely to add value, particularly in kitchens and bathrooms.
- If you are developing a variety of properties you can call on contacts and reliable bulk purchase discounts.
Boosting Your Development Profits
1. Be Smart About Development Finance
Calculate carefully how profitable the opportunity is, and also how much you can afford to pay for the development site is a key starting point. From here, choosing the right lender is vital – the wrong rate might directly impact your profits. High street banks generally mean high interest rates, while specialist property lenders offer excellent flexibility and development finance rates. These lenders can be difficult to locate, so work closely with your commercial finance broker.
2. Capitalise on Commercial
Commercial properties typically provide greater square footage than their residential equivalent. They obviously provide more profit opportunity – the more units you fit into space, the more income you create. Can a factory in the up-and-coming area be converted into an industrial-style apartment or the office building to student’s lodgings? Such conversions are often viewed favourably when it comes to planning permission, particularly if the property has been vacant for some time.
3. Creativity is Key
Perhaps a layout could be reworked to fit in an extra rental space, or a garden could be landscaped to improve the appeal of a family home.
4. Build on What You Have
Is there additional property capacity on any property within your portfolio? Securing planning permission on your own land can save you hundreds of thousands of pounds to make your project as successful as possible. You ‘re also likely to save time and money when it comes to connecting the new property. As a general rule of thumb, a garden about three times the size of the property inside it could be built on without reducing its value.
5. Sell To The Big Players
High-profile developers are also searching for sites with planning approval, ready for potential development. It’s all about the long game, so you’ll need patience while you’re waiting for planning permission. It’s a risky strategy, but it can reap real benefits – selling land with planning permission is more lucrative than without it.
As with any other investment, having your feet planted firmly on solid ground is essential because, most people go into investing expecting too much, too soon. Take care and have clear objectives.
The best plan when buying commercial property is to always keep your goals in mind, know how you’ll finance your purchase, study the market religiously and remain patient. By doing this, when the right opportunity arises, you’ll be ready to pounce and reap the rewards.
In short, if you put in the time and effort necessary to understand wise commercial property investing, there’s no reason you can’t significantly increase your portfolio value. But always remember, research, location and finances come first, and when in doubt, consult an expert.