I recently wrote an article titled Have You Considered Investing in
Commercial Premises? and I said to myself that it would be interesting to
explore this subject in greater depth. Today I offer you some practical
recommendations if you decide to embark on such an investment. It should be
known, in fact, that this type of investment has much specificity and that
certain aspects should be vigilant.
1 / A good location is a guarantee of a good
investment
While housing, even in the wrong place, will always be rented at a low
price, the same is not true of commercial premises. If, on the other hand, the
location is sought after by traders, it will be easier to re-let the premises
in the event of the tenant's departure notice and you will potentially have
more chances of making a capital gain. In addition, high traffic is a sure
source of turnover for your tenant; and if its financial health is good, your
rents will be up to date. The flip side is that profitability may turn out to
be lower because the purchase price will be high. Profitability pays for risk
and this goes for many investments.
Prices for commercial premises are not calculated in the same way as
for housing, although it is possible to give ranges for a given sector. The
best locations are of course located on busy thoroughfares, shopping streets,
pedestrian streets, squares, perpendicular to a street, near a public transport
stop, etc. Sunshine can also come into play.
2 / Be smart, remember to find
out about city politics
I have seen medium-sized city centers literally undergoing a
metamorphosis. Previously completely neglected by traders, they have become
dynamic places where people like to come to stroll, eat, go out, etc. Imagine
that you bought there at the start of this trend reversal!
It is quite easy to know well in advance the town hall's plans for a
district, whether it is through the magazines it publishes, the press, town
planning services, etc. If a district or a street must be completely redone in
the short or medium term, this will have a definite impact on the rental and
market value of your commercial premises.
3 / Choose a commercial space
already occupied
The big advantage of buying a Commercial
real estate in Curacao that is already rented is that you can know the
rent charged and therefore the rental yield. The second big advantage is that
you don't have to search for a tenant. However, make sure of the tenant's
intentions in place: does he plan to move? to renovate the premises? ...
Whether you buy your commercial space empty or furnished, make sure
you have average rents in the area. If you buy empty premises you will need to
ensure profitability and if you buy occupied the rent may be higher or lower
than the current market.
4 / Choose an old commercial space over a new
one
As for residential accommodation, the old one has more attractive
prices than the new one. The peculiarity of commercial premises is that they
are delivered raw. It is therefore often necessary to grant the first months of
rent free of charge to the tenant in return for the work undertaken.
Except for an excellent location which would increase in value, I
advise against investing in the new. For my part, until now, I have always
invested in the old for my rental investments. In addition to the purchase
price, which is higher in new vehicles, profitability is often uncertain due to
commercial development which is generally difficult to anticipate. There is in
the district where I live a street which has been completely redeveloped by the
city and new constructions have been added. There are dozens of unsold
commercial premises and I know a landlord whose tenant left because he could
not meet his deadlines and who had to lower his rent when re-letting.
5 / Delegate the management of
your commercial premises
I strongly advise you to entrust the management of your commercial
premises to an agency specializing in commercial real estate. Real estate
agencies who work primarily with individuals are not always aware of all the
specifics of commercial leases.
If, however, you decide to manage your commercial premises yourself, I
advise you 2 things: Before setting up a tenant, it is advisable to study the
balance sheets of the last 3 accounting years / the forecast of the activity
and to protect yourself in an entrepreneurial perspective to know if the
envisaged activity will be viable in your premises. The second tip is to have
the lease drawn up by a notary. The cost varies according to the offices, but
you can count 1 month's rent. Not only will you be sure that the commercial
lease is up to date with the latest legislation, but above all it will be
recorded in the notary's minutes. This will make it easy for you to get it back
if you lose it. Get advice from the notary on taxes and work to be charged to
the tenant.
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