What To Consider When Expanding Your Commercial Property Portfolio￼
If you are considering expanding your commercial property portfolio, congratulations! This is an exciting time, however it is important that you put the work in now to make sure that you make the expansion a success. This involves thorough market research, preparing financially, full risk assessments and getting the right cover. So, let’s find out the important things you need to consider before expanding your commercial property portfolio!
Research The Market
Before you even think about investing in anything, you need to thoroughly research the market. Whilst your current investments may be working successfully, the real estate market is constantly evolving and so if it has been a while since you have invested, you need to crunch the numbers to make sure that the investment can be profitable. Work with your accountant to do this if you don’t feel confident, and definitely if this is a sizable investment that you are making. It is also important to spend a good few months looking at the rental market that you are expanding into so you know exactly what you are likely to be spending and getting in return.
Which Direction Will You Go In
Now that you have an idea of whether this will be a viable investment, you need to decide the exact direction you will be going in. This might be sticking to your current business model and expanding further into the same market, you might be moving out of your comfort zone into a different area or perhaps you are making different investments in different markets! If you decide to delve further into an area that you have experience in, for example office buildings, you are likely to take advantage of your prior knowledge and this could result in a very successful investment. By diversifying into a new area, you are reducing the volatility of your investments as the overall risk of loss is reduced significantly when they are spread out.
This is a very big decision to make, so do thorough market research into the different areas you are considering so you can make an informed decision based on data, rather than making a decision on a whim!
Find The Right Property/Properties
You’ve decided that this investment is viable for you and you know the market you want to target, so now it is time to start looking for the right property or properties. Before you start this stage, you must make sure that you have established a clear budget. When entering commercial property auctions, if this is the method you choose, it is often easy to get carried away, so it is important that you know the absolute ceiling price you are willing to spend. Work with a trusted real estate agent here for some guidance if you aren’t buying through auction.
Beforehand, you also need to use your market research to decide what size property you are looking for, the distance to amenities and public transport and also what is in the property itself in terms of suitability for your desired project. When you know exactly what you are looking for and exactly how much you are looking to spend, your search should be much more simple!
Get The Right Insurance Cover
Making sure that you have the right cover for your business when you expand is essential. Just as any business going international would need to work with credit insurance brokers, when you expand your commercial property portfolio, you will need to make sure that you work with a broker to find the right combination of property damage and liability insurances. To do this, it is best to work with a broker who is experienced in that particular area, to make sure you get the right cover for the right price. This also means that should you need to claim later down the line, the process will be so much easier, as you can be in direct contact with the broker and they can help you to make the claims. Protecting your business with insurance is essential, so getting the cover sorted as soon as you can is key.
Jumping into expansion at the wrong time can be disastrous, so put the work in now and you will reap the benefits in the future!