Commercial real estate is a lucrative investment, provided you choose wisely and take the correct steps to maximise your rental income. In fact, you can even do your bit to enhance the value of your investment over the years. Think beyond the rise in real estate prices because you cannot control this factor. The prices may fluctuate according to the dynamics of demand and supply in the area. However, you can employ strategies to decrease expenses, increase cash flow, and boost overall equity. Here is a list of best practices to make the most of your commercial property.
These strategies can help property owners and managers enhance the profitability and operational efficiency of their commercial real estate investments.
Increasing the rent is perhaps the simplest way to maximise your ROI on commercial real estate. Start with in-depth market research before renting the place for the first time to ensure you get an optimal value. Pay close attention to upper and lower levels for similar properties in the same location. Also, assess the rental value every year before renewing contracts or switching tenants. Remember to keep pace with the market trends.
Increasing rents is not always an option, specifically when the real estate market is in a downturn. You may get only a minor increase that hardly gets close to your expectations or covers the cost of ownership. At such times, lowering operational costs can do the trick. Check your historical operating expenses and review areas to cut back your spending. For example, you can find more affordable insurance deals and switch to LED lighting to reduce your utility bills.
This one is a no-brainer because maintenance and improvements can make your place more rent-worthy. Consider cosmetic improvements such as new landscaping, a fresh coat of paint, or a decor makeover. Functional enhancements include bathroom and kitchen renovations, the addition of a new floor, and changing the floor plan. But you may have qualms about the effort. Fortunately, you can collaborate with experts who specialise in managing commercial properties for owners. Beyond overseeing improvement projects, they can help you with tenant vetting, rent collection, and end-to-end property management, with a commercial property lawyer.
Not all commercial real estate investments yield the profit investors expect. But altering the intended use of the place may drastically change its value. For example, you can convert an industrial warehouse into a hotel or an office building if it is in an ideal location. The conversion may require effort to acquire a zoning variance, but you can expect immense benefits with the move.
The best properties may fail to deliver value if vacancies are a frequent occurrence. You may update it with the latest features and offer it at a fair rent to get tenants coming. Alternatively, consider investing more effort into marketing the property for renting. Focus on finding credible tenants and ensuring they stick for the long haul. You can get incremental increases in rental value every year without stressing about vacancies.
Maximising the value of your commercial real estate property is the cornerstone of success and long-term growth. Follow these simple tips to stay ahead of your growth goals.