Buying a commercial property isn't the same as buying a home. The numbers in this purchase matter a lot more. To make matters a bit more complicated, some of these numbers can be sneaky. A perfect property that looks excellent on paper could end up costing money every month. 

If you're thinking about putting your savings into a commercial property, it’s vital to learn how to slow down and look at what you're actually buying, who might want to rent it, and whether the property can keep making money when conditions aren't perfect. Here are the things we’d pay attention to first.

Don't Fall in Love With the Building Before You Meet Its Tenants

A beautiful commercial building could be just that. It can be a terrible investment if nobody wants to rent it. Looking into the tenant situation is crucial before getting too excited about how good the property looks. It would be best to find out who the current tenants are. You should also determine for how long they've been there, what they're paying and when their leases finish. 

You should also ask what kind of businesses would realistically want the space if the current tenant leaves. A property designed for one very specific business can become a headache when that business disappears. You would much rather have a flexible property that could suit a dentist, accountant, or other ordinary business than one that needs a very particular tenant to survive. 

Calculate the Rent After the Property Has Had a Bad Hair Day

The advertised rental income might be appealing. However, that’s not the same money you'll get to keep. Commercial properties can come with repairs, insurance and council rates. Don’t forget about management fees, maintenance and periods when a tenant doesn't pay or the building sits empty. Some leases push certain costs onto tenants. Still, not every additional cost is going to be their problem.

Take the cheerful rental estimate and start knocking holes in it. What happens if the property is vacant for six months? What if the air-conditioning system needs replacing? What if a tenant asks for an incentive? Run those numbers. It's essential to do it before you buy. If the investment only looks good when absolutely everything goes right, it doesn't look good enough.

Look for the Neighbourhood's Next Ten Years

A commercial property can become much more valuable with time. However, that can only happen when the surrounding area changes in a useful way. New development projects are going to be useful to you. They can all affect the businesses that want to operate nearby. 

If you’re looking into Australia, know that different parts of the country require different approaches to investing. When looking at Perth commercial real estate, you’ll see that the surrounding development matters, as it drives more people to Perth, and therefore offers businesses more room for growth. 

Even when you look into other popular locations, don’t assume that things will go well because a suburb is well-known or adored. Instead, look at what's being upgraded and whether those changes are likely to bring more customers.

Check Whether the Building Is Asking for a Huge Shopping List

Commercial buildings have plenty of expensive bits hiding behind walls and ceilings. Fixing roofs, plumbing, and electrical systems isn’t really cheap. Then there are heating and cooling equipment and fire safety systems, which can all turn into major expenses. You might not notice a problem during a quick inspection. This is the reason why you shouldn't rely on your own eyes alone.

Get proper inspections, even if it means you’re paying extra money. Ask for maintenance records where they're available. They should be available. Find out the age and condition of the major systems. If something is already nearing the end of its useful life, include that cost in your calculations.

Read the Lease

The lease can completely change how attractive a commercial property is. Look at the rent, increases, lease length, and renewal options. Also pay attention to outgoings, repair responsibilities, permitted use and what happens when the tenant wants to leave. These details can decide whether you're sitting on a dependable income-producing property.

Pay special attention to lease expiry dates. If several tenants are due to leave around the same time, your income could suddenly become much less predictable. If a lease has many years left with a strong tenant, that's a different situation. 

Conclusion

Take your time and be picky. You don't need to buy the first property that makes you feel like a proper investor. In fact, it's better to walk away from five questionable deals than force yourself into one. There will be another property. Your job is to make sure the one you choose gives you a reasonable chance of sleeping properly at night.