Investing in Commercial/Industrial Properties
When it comes to property investment, apartments and condominiums are often the first investment choices that appear in the minds of investors. But what about commercial and industrial properties, are they a good investment to consider?
A high return investment, but experience is required
With a rental yield that can range from four to eight per cent, commercial/industrial properties easily offer up to twice the rental yield of the average apartment, which is typically in the two to four per cent range. However, unlike residential properties, commercial/industrial properties are harder to judge in terms of worth, as many would find it difficult to measure the value of say, an industrial facility in Tuas. An investment professional, such as a Chartered Mortgage Analyst™, can help you navigate through this tricky, but profitable investment.
In fact, some developers are beginning to develop strata-titled industrial properties that are being offered at increasingly attractive prices in order to lure investors. In looking at these properties, investors should take note of the key amenities available at each commercial/industrial property, such as the number of lifts, loading bays, floor load and the height of ceilings, as these can help you determine the rent amount.
Keep up-to-date with government policies
Knowing the policies that the government has in place in regards to commercial/industrial properties is a necessity to staying ahead in the investment game. Staying current with the government's policies not only protects you from any compliance violations, but can also help you predict the future yield of your investment. For example, if the government plans to impose policies will affect the number of tenants utilising commercial/industrial policies, you can gauge the positive or negative after effects on your investment.
Knowing the government's policies on the allowable uses for commercial/industrial property helps you decide who you can rent to. If you rent to a company that is not utilising the property space according to the government's recommended ratios (60% industrial activity, 40% non-industrial activity, depending on the zoning), you may risk losing your tenant due to noncompliance. Therefore, it is advisable to rent only to tenants who will utilise the property according to the government's established guidelines.
When in doubt, ask a professional
Investing in commercial/industrial properties is certainly not for the casual investor. While it can be done with the right amount of experience and careful research, it is still recommended to advise a professional, such as a Chartered Mortgage Analyst™ before investing. It is very important to know the regulations surrounding commercial/industrial properties, as knowledge of acceptable uses and zoning is an absolute must for any investor.