How to Investigate Cash Flow in a Commercial Investment Property

When you are considering the purchase of an investment property on the Gold Coast or in Brisbane, it is wise to gather the facts about the cash flow and future opportunity for the property.  You can do a lot of that research yourself before you bring in the ‘experts’ to help you move ahead.

There are things to look at so you can then balance the property opportunity against any risk that you may also identify with the property.  You can even do a SWOT analysis if that suits the diversity of the property and your ‘time-lines’.  Most properties have ‘risk’, but they also have ‘opportunity’ to be taken in balance.

city street
Review all property facts and details.

How Do You Start?

Where do you start with this?  You may know the type(s) of property that you prefer to invest in, but that is just the beginning of things.  Will the property support your income requirements and investment plans?  Let’s go a bit further on that.

Here is a checklist of some of the more significant issues to look at when you find an attractive property; you can add to this list based on your focus, the property, and the location. 

Splitting Up the Property Information

As a ‘golden rule’, do not move on the property purchase until you are comfortable with all the facts that are provided to you.  Here are some thoughts on that:

  1. Current tenancies – visit the property first to get a ‘visual’ perspective on the tenant mix and the layout of things.  Then you can assess the existing tenancies, the businesses, and the combination of tenants as they support each other.   The tenant mix assessment is a big part of retail property review and planning.  Shopping centres are a case in point.
  2. Vacancies – if the property contains several tenancies, then look at the existing vacancies and determine the chances of leasing the space in the coming six months.  Is space ‘prime’ or ‘secondary’ when it comes to business position, layout, and presentation?  Extended vacancies can strain the investment potential of a property, so it is worth considering in greater detail.
  3. Upcoming vacancies – these will be driven by lease expiry dates in the existing tenant mix.  Review the leases and look at the expiry dates inside the next 18 months.  You can then assess or discuss the leasing of the space with the existing tenants and or external leasing agents.
  4. Lease supported rents – this is the income stream and the ways it can create cash for the property owner over time.  Lease rents can be gross, or net rents and the difference will be the outgoings for the property and how they may be recovered.
  5. Income and expenditure – these numbers will be ‘current’ to a financial year and an existing property budget or business plan, so explore them and identify any strengths and weaknesses in the cash flow.  You can compare the expenditures to similar properties in the location, so you know that the ‘averages’ apply.  You can compare the rents collected to the actual market rents; in doing that, you will know if any tenancies are paying above or below-market rents.  The question is then if the matter will be a ‘pressure point’ at the next rent review with the tenants concerned.
  6. Third income streams – these are extra rents that you can obtain from the property and the other areas such as storage, antenna space, signage, car parking, and licenced outside space.  If you can identify those extra income streams, ensure that there is some format lease or occupancy document that supports the process of occupancy.
  7. Lease documentation – look at the occupancy documents in detail as they are the supporting process for occupancy, risk, investment performance, and tenancy interaction.  Check the leases against the inspection findings that you achieved in looking at the property.  When in any doubt, take photos of what you are seeing or worried about so you can ask more questions.  Always seek the fullest summary and supporting documentation of all leases and tenants.
  8. History of the asset – it is always nice to know the history of the property and just what has happened in the investment over the years.  Get a full set of ‘as-built drawings’ of the property as part of any purchase contract negotiation, as they will come in handy when tenant changes or property upgrades are required.
  9. Capital works programs – these are the more critical items of maintenance that may occur once every few years or more.  They are also and generally reserved for items of essential plant that may need replacement.  In any older buildings, it is wise to get an engineer and a quantity surveyor to give you a full assessment of the spending requirements of a capital nature over the next five years for the property you are interested in.

So all of these issues will help you understand the tenancy variety. They will also help you know the stability of the cash flow for the property.  From all of that, you can take the next step in moving towards the purchase or negotiation decision.  When in any doubt, ask more questions. 

Take plenty of notes in your property selection and investigations.  Check all information and question anything that seems to be missing.  A due diligence process is also helpful when you get to the time of going to contract on a property that you like.

If you would like more help on property purchasing or sale in Queensland or on the Gold Coast, Please call John Highman on 0417221108

How to Optimize Your Tenant Mix in Shopping Centre Management

shopping mall

Most tenants in a shopping centre today are of the smaller business type. The tenants are usually centred around a ‘family business’. They thrive when the shopping centre is performing well; they struggle when the reverse is the case, given that it is the only location or one of just a few that they operate from.

It stands to reason that a successful shopping centre is built around well-chosen tenants that are trading at good levels. So, if you manage or lease a shopping centre today, the tenants that you communicate with are the foundation of property performance and occupancy.

  • Can you improve your tenant relations this year?
  • Are you watching the lease and occupancy changes at the property and are you prepared to negotiate leases early? There are things within that to think about.
woman and filing cabinet
Get your commercial property systems organised.

Work the Tenants and the Mix

Keep in close contact with all the tenants in the tenant mix, and watch the interaction of anchor and specialty tenants in the property from a customer and client perspective. Then look for the tenant strengths and weaknesses and work with both. Tenant weaknesses can be resolved, and the strengths of a few tenants can be optimised for the greater benefit of the entire property.

Here is a tenant contact management plan that could be used in most retail properties over a 12 month period:

  1. Look at all the leases coming up for expiry in the next 24 months. Decide what tenants you would like to keep and those that are not quite as high on the priority list for ongoing occupancy.
  2. Package up some lease offerings for your ‘A Grade’ tenants so you can renew their leases early.
  3. Create meetings with all your major tenants on a monthly basis.
  4. Meet with all specialty tenants at least once every 90 days
  5. Create minutes of tenants conversations and meetings so you can react to or action any important issues early
  6. Look at the dynamics of the tenant mix and how the various merchandise groups are performing in comparison to each other.
  7. Create tenant management guidelines and lease negotiation documents within your retail property business plan. You can monitor your actions and decisions within that concept every 90 days as part of the property performance ‘check-up’.

So, these items form the basis of a tenant management plan and tenant retention plan in retail property. Forward planning like this will help you optimize the overall property performance and the selection of tenants into the future.

How to Find Buyers for Your Commercial Property on the Gold Coast

man standing by charts

When you’re looking to sell your commercial property on the Gold Coast, understand the priorities and the pressures when it comes to reaching the right people in the right way. Don’t just advertise your property and wait for the enquiries to come in. An excellent real estate agent will do a lot more for you than just that.

It is a fact that there are plenty of buyers for most Gold Coast properties throughout the year, but there are some choices that you have when it comes to reaching out to right people effectively and directly. Strategic marketing should apply. That is where your agent should know what to do.

Where can you start with this idea? It is not just a matter of placing a property on the internet for sale; there are many other strategic things that you can do as part of the process to maximise the enquiry and the inspection opportunity.

Let’s open on that point and give you some support. Here are some specific ideas to help you tap into the right buyers for your commercial or retail investment property.

  1. Defined target marketing – There will always be at the time of sale, a perceived target market that should be matched to your property. Target marketing has to feature in your marketing efforts, and that requires both strategy and the appropriate marketing spend. There are many ways to approach the marketing process today, but there should be a right balance between online and offline marketing; reach out to your buyers comprehensively at the time of sale.
  2. Local area marketing – There is also great value in local area marketing when it comes to reaching out to new people. That can be done effectively and directly. So, the idea here is that you can specifically target market your property into the location and across the target audience. Define that audience before you take the property to sale, and ensure that your agent has a clear idea of how they are going to reach into that target audience individually as part of your promotional campaign. There are different channels of media and advertising to be undertaken.
  3. Selecting the best time of year to sell – There are different times of the year where a property sale and promotion will be more effective. A review of history in your town or city will show the trends when it comes to the best times of year to reach out to others in selling your property. Most promotional campaigns extend for approximately eight weeks. As part of that, the target market must be engaged, and inspections encouraged. Ensure that the agent that you are working with has a clear understanding of when the property campaign should be started and how that campaign will be staged over time.
  4. Best methods of sale – There will be selected and proven methods of disposal that could be more effective than others when it comes to getting a positive result in selling your property in a timely way. So, the message here is that your property promotion and the campaign to sell your property can be carefully structured for the best results from a method of sale that is to be commenced in a timely way.
  5. Balancing your marketing mix – Traditional methods of marketing still apply today; however, the online portals and the search engines have a big impact in attracting people to your property. The attraction is a critical issue in promoting your property most effectively throughout the campaign. What can you do with that? So, your property promotions should be balanced in marketing both traditionally and online when it comes to reaching the target audience. The question to answer here will be how can you reach the target audience and where will they be looking for a property such as yours? The agent that you choose in your sale promotion should also have a clear understanding and recommendations to make around that question.
  6. Existing database of old leads and qualified prospects – The larger real estate agencies have a list of qualified buyers from previous campaigns. At the start of any sale marketing campaign for commercial or retail property, the qualified leads from other campaigns can be reviewed and updated regards your property, in case they are still active and potentially interested in your property sale.

So, these are some of the things to think about in taking a commercial or retail property to the market for sale.

If you need help in selling a commercial property on the Gold Coast or in Brisbane, contact John Highman on 0417221108

Investment Property Trends on the Gold Coast

man thinking about buildings

Commercial and retail property on the Gold Coast is now reaching a new level of attractiveness from an investment perspective.  Owning, upgrading, or expanding property portfolios over the coming 12 months is a good idea where opportunities can be found or exist.  When you compare the commercial property market to other forms of investment in today’s terms (2020), the positives are easily seen.

What’s happening locally? The Gold Coast is now a large and diverse property market.  Increasing population growth is a further leverage point for the property market and those that like to participate in it.

Why is this? The existing growth of the community and population on the Gold Coast has ignited fresh enquiry for quality assets.  Here are the known facts that impact and enhance property on the Gold Coast:

  • Beenleigh is now becoming a ‘hub’ of activity midway between Brisbane and the Gold Coast.  It is also a key part of the integration into the rail network through the corridor.  This marks the start of the greater South East Queensland community growth and expansion into the northern Gold Coast.  Suburbs south from that point include Yatala, Ormeau, and Coomera, all of which are growing with infrastructure, industry, and community zones.
  • Northern Gold Coast suburbs such as Coomera, Ormeau, Arundel and all those in between are growing comprehensively with new residential developments and infrastructure projects.
  • Shopping Centres and business precincts are taking shape and or exist in all the new suburbs to the north of the Gold Coast.
  • The M1 Freeway carries hundreds of thousands of cars daily to and from the Gold Coast region; it will only get busier.  The Springwood freeway interchange is now taking shape and will soon direct more people through the region and integrate well with fast transport networks such as buses.

Growth and Change

So the south side of Brisbane is showing considerable growth and change; it is the ‘gateway’ to the Gold Coast.  If you are an investor in the region or would like to be, then think about these ideas in your property decisions and focus:

  1. Quality Properties – choose your next investments based on quality in either location or improvements or both.  A good quality property can be defined by a number of categories.
  2. Capital Works and Improvements – some properties will be in need of maintenance of a minor or major nature.  You can review those facts in a due diligence period prior to settlement or completion.  The question you must ask yourself is whether you have the budget for the maintenance activities that are required in the property.
  3. Upside or Opportunities – some investment properties have ‘untapped’ advantages that can boost occupancy, income, or value over time.  A quantity surveyor and or valuer can give you an idea of those facts before you purchase an investment property.
  4. Top Locations – some suburbs are already locations of priority and business activity in the region.  Some suburbs to look at initially would be Southport, Robina, Helensvale, Ashmore, Surfers Paradise, Broadbeach, and Tweed Heads.
  5. Property Spend – how much are you prepared to spend on your next property purchase?  Look at the loan value ratio offered by your preferred lenders and then relate that to your price range.
  6. Stability of Income – it is always good to have a stable income from a tenant mix with low or no vacancies.  The property can be assessed for those things.  Purchase your property with a preference for occupancy, yields, and returns over time.
  7. Documentation – every investment property will have a selection and variety of lease documentation reflecting the tenants in occupancy.  Have your solicitor review the leases and the terms and conditions of each.  Look for risk factors in leases or ‘weak’ documentation where critical dates may have been overlooked or could be too close in time for effective implementation.  A solicitor can review those documents comprehensively before you settle on a new property purchase.

So, all of these things can take you forward in property investment and your decisions with your property portfolio. 

Gather your facts and information before you finalize the next property purchase on the Gold Coast.  Of course, there will be other things as well that you can add to the list based on your property types and or improvements.

Important Investment Choices on the Gold Coast

retail shopping centre gold coast

Commercial and Retail Property on the Gold Coast offers plenty of opportunity for investors now and over the coming years.  Look at the facts about the region. There is the population growth underpinning the market, and the greater variety of property available.  So, what choices will you make when it comes to property investment?

Where will you start your property investment choices?  Do you prefer:

  • Shopping Centres?
  • Industrial property?
  • Office property?

From those questions, you can consider the precincts of the northern M1 corridor, the central Gold Coast, or the southern regions around the border and Tweed Heads.  Invest in the properties that you understand and can afford.  It is interesting to note that on the scale of ‘complexity’, retail property and shopping centres can be the more complex. 

As part of that fact, the retail shopping industry is under a shift with the pressures of the internet and the way in which customers purchase goods today.  Shopping centres will not disappear, but they are changing. 

Retail Property Changes Today

Consider these facts as part of retail shopping centre ownership and investment activity:

  • Department stores are less important as anchor tenants and are a declining tenant type
  • Customers are looking for entertainment and or convenience as they shop
  • Fashion tenants are best located and are more suitable in larger regional shopping centres
  • Some tenant types are still active occupants but are reducing in size (ie newsagents)

So what can you do with all of this?  Consider upgrading your assets from time to time and or diversifying your asset classes. 

Diversity generally brings with it more stability when some property types are more or less desirable to invest in, or when oversupply impacts occupancy and income.

Contact John Highman on 0417221108 for help with your next Gold Coast Sale or Leasing decision.

Sales Strategies for Commercial Property Investors

plants on coin stacks

A sales plan for a commercial or retail investment property. What does it look like and should it be ‘special’ when you want to sell your commercial or retail property? There is a strategy here to think about. You want a good price and a timely result when you sell your property. What can you do in selling your property to get the best outcomes?

The simple answer is that most investment properties are special in some way or form. That says every part of the property description that you use in the marketing program should be optimised for the facts of the property as they are. There is also a target market to think about in creating the marketing campaign. There are also location issues to bring into the property marketing ideas and decisions.

city buildings
Know your investment property in detail before you take it to sale.

When you look around your town or city you will see plenty of other properties for sale, so there is a lot of importance to the process of marketing and connecting with the right people.

The sales plan for commercial property should feature:

  • A selection of media to cover the target market
  • A priority spend on the elements of the media that are likely to be more successful than other channels
  • A staged campaign of promotion over a period of time
  • A definite target market of buyers that you can connect to
  • A skilled and successful agent in your location that already has a database of leads in the property type

So these are important and yet simple things that many agents overlook when marketing a property. Selling your property is not an ‘experiment’, so choose the agent that really knows how to do things and can prove it to you.

How to Target Market Your Commercial Property for Sale in Queensland

computer keyboard and marketing

When it comes to selling a property today as a vendor, it is critical to understand the target market that should be attracted to the property and just how the agent will tap into that target market.  So there are some questions that you can ask here. 

Don’t just assume that your property will be ‘marketed’.  Ensure that your property will be taken to the potential buyers in a strategic way.  Who will be approached and why?  What are the selling points of the property that should feature in the property advertising?  What media channels should be used in the marketing campaign?

Shorten Time on Market

When these things are identified it is easier to make the marketing campaign work for the property owner and ultimately the targets of the price and time on market.  It is also easier to predict price ranges that could apply to the sale.  Market knowledge here is the key and a good local agent will understand all the variables.

woman reading newspaper
Know where and why you are marketing your property for sale. Clarity is important to getting enquiry.

Quality Marketing Campaigns

Marketing campaigns for selling property involve money and a mixture of the following:

  • Newspaper advertising (yes it still has an impact)
  • Email marketing (major impact as will be the database of buyers that an agent may have)
  • Direct calling qualified people from the agent’s database (high value)
  • Internet listing on key websites (everyone goes there to look for a property)
  • A signboard on the property (get a good quality sign on your property – something that stands out)
  • Flyers and Brochures – some will be through mail drop, and others will be through email blasts to a database list
  • Information Memorandum – this will be the full and comprehensive detail about the property and the offering for sale

Every dollar spent on marketing should be well considered to the targets that are determined.  Don’t spend money on marketing without fully appreciating the plan to reach people and in what way that will be done.

man's hand holding a megaphone.
Get the marketing message out effectively for your property as part of selling.

Its a Fine Balance of Property Marketing

Today we find that the marketing of every property is a fine balance of all the above items based on the target market that you are trying to attract.  When listing a property for sale, ask the agent to define the target market and then explain how the marketing campaign will attract the buyers. 

The best agents know the answers.  If you need help in planning the sale of your property in Brisbane or Greater Queensland, give John Highman a call on 0417221108