Commercial property investment can bring with it long leases, diversified investment and attractive rental returns. But any property purchase can come with its risks – so how can you manage and mitigate these?
We cover four of the key risks with commercial property and potential ways to find peace of mind.
Physical Risks
What are the risks? Fire, flood, lightning, theft or vandalism.
How can I manage the risks? Commercial property insurance can provide cover for physical loss of or damage to your property. Commercial property insurance cost and cover will depend on your specific choice of policy.
Property Ownership Risks
What are the risks? Finding out there were unapproved building works or encroaching structures on your land that you didn’t know about prior to settlement. Taxes, charges or levies charged to your land that you didn't know about due to an error by your conveyancing practitioner. Competing interest claims that you weren't aware of prior to purchase, or finding out you don't have a legal right of access to and from the property either by vehicle or on foot.
How can I manage the risks? You can manage many of these risks with commercial title insurance. With no excess and one simple payment with First Title, it’s a quick and easy way to get cover for common property ownership risks.
Tenant Risks
What are the risks? The tenant could default on their rental payments. The tenant could breach their own commercial tenant insurance conditions, underinsure the building or provide incorrect information that makes their tenant cover void. The tenant could cause damage to the property, either on purpose or accidentally.
How can I manage the risks? Some of these risks can potentially be mitigated with a good commercial property manager, who can help to attract and retain quality tenants in the first place. Commercial landlords insurance is also a popular way to cover against losses that might be incurred by tenant actions. Quite often, commercial landlords insurance will also include property insurance and public liability cover.
Vacancy Risks
What are the risks? Vacancy periods can pose a real risk to your rental returns, and finding a good tenant can sometimes take longer for commercial property than for a residential property.
How can I manage the risks? Careful selection of commercial property in the first place can improve the chances that the property can be reliably tenanted out – for example, choosing retail property where foot traffic is regular and accessible. In addition, a great commercial property manager can help you to attract and retain quality tenants.
No investment property is without its risks, but some simple changes can help you to gain the best potential for a robust rental yield. If you’re looking into title insurance for commercial property, you can get a quick quote or request cover now.
