5 important points to consider when buying commercial property
5 important points to consider when buying commercial property
So, you have heard that buying and investing in Commercial & Industrial Property is a sure thing, but before you rush out there to buy up factories, office blocks and retail outlets, here are 5 important points to consider from Len Pears, Director of Quagga Property Buyers.
1. Upfront and ongoing costs
When buying an industrial or commercial property you will either have to pay VAT or transfer duty on the purchase price; which you will have to pay is dependent upon the sellers VAT status. If, as the purchaser, you buy a vacant property into a Vat Vendor Company, Close Corporation or Trust, you can claim the VAT or transfer duty back from the Receiver of Revenue in your next VAT cycle. If you purchase the property with an existing tenant into a Vat Vendor Company, Close Corporation or Trust, the VAT, if applicable, can be zero rated and the transfer duty does not apply.
On an ongoing basis it is important to include municipal rates and taxes into your budget. If the property is part of a commercial and industrial sectional title complex you will also have to pay monthly levies.
2. Location Convenience
Locality to the majority of your customers is key, ensuring they are able to get to your premises easily. It is also important to consider easy access to major routes for dispatching products.
3. Business Growth Potential
This is an important point as it can affect you in many ways. We always advise clients not to buy premises that are either too big or too small, but to rather start out with just enough space for your current business needs, with room for between 20 & 30% initial growth.
4. Area Zoning
It is important to buy a property that is zoned correctly for a business’s needs; Commercial zoning for offices, Industrial zoning for factories and Retail zoning for shops and retail outlets. There are costs and other factors to consider when attempting to get a property rezoned.
5. Avoid placing a tenant in their personal name
If you buy a commercial or industrial property for the purpose of investment, avoid placing a tenant in their personal name and rather ensure it is a Close Corporation, Company or Trust. For in the unlikely event that you need to evict them as a tenant it is a far easier process if they are a CC, Company or Trust than an individual person. When placing a CC, Company, or Trust as a tenant you must ensure that personal surety is given by the directors, members or trustees.
It is always important, especially more so with commercial and industrial property, to work with a qualified, proven agent, they will be able to help you navigate your way through purchasing the perfect property for your needs.
For more information please contact Quagga Property Brokers on 021 712 8825