Is this a good time to buy?
This question is not new to me - after 27 years in the business I have been asked this many times. As an agent earning a living off commission derived from selling and leasing commercial real estate it would be easy to say yes to keep our income stream flowing. However, that might not be the right answer for the person asking, and it is an agent's duty to give sound opinions based on experience gained from working in the real world.
The very first thing one needs to understand is the place where this question is coming from. Is the person an investor or are they a business owner with a desire to own a premises to house their business within. This is the point where the advice given might differ depending on the answer to the above question.
Let's take these two scenarios and explore them.
The first is the business owner who is tired of paying rent to another party. Each month they see a sizeable amount of money leave their bank account to pay for the privilege of occupying a space to trade from. It can at first glance look like they are providing a luxury lifestyle for someone else. Be cautious with this one as owning buildings is not just collecting rent, especially in today's environment. Buildings must be compliant with legislation for quakes, fire, health and safety and many more things. As a tenant you may not be aware of the actual costs it takes to maintain a building to ensure it is fit for purpose. But let's say you have talked to your accountant and sought legal advice and it is decided that this is the right decision for you to buy your own commercial property, then now is a very good time to get in and purchase a premises. The market has seen the number of sales fall due mostly to the cost of finance because of the OCR going so high and a tightening of lending policies from the banks. When the number of sales fall and inflation pushes the cost of living up, there will always be owners who need to sell and finding these properties is where good value can be obtained. If this is you, get busy and explore the market.
The second is the investor looking to expand their property holding. If you are in the fortunate position of having cash to purchase, then it is also a very good time to move forward. However, if you are having to finance the purchase first seek advice, as the cost of finance can absorb all the income generated by the property and may even see you having to dig into your pocket to pay the interest if the returns don't cover it all. The things you need to research here are much more important. Is the lease a strong lease and are the tenants in a financially sound business? The last thing you want is a tenant who can't pay their rent. Another aspect is the condition of the property; does it meet the seismic requirements for earthquake strength, does it have a current BWOF (if one is required)? Has there been any unpermitted building work carried out that might come back and bite you? Other aspects that could be important are such things as parking, council zoning and future business uses. Doing your homework is as important as finding the right building.
We also offer a property management service, where our expertise can ensure that you get the best from your investment going forward.
Feel free to give us a call to discuss your requirements.
NAI Harcourts Whangarei
Level 2/33-35 Robert Street, Whangārei 0110
09 430 1000