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What are some things that I should not do if I am investing in commercial property?

Investing in commercial property is different to residential property investing. The rewards of commercial property ownership can be great, but in times of market uncertainty, there are risks to be considered.  We provide some helpful tips below:
  • Don’t overcommit financially to commercial property ownership. It can be tempting when things are going well to financially stretch yourself in search of quicker or larger returns. A more sensible strategy is to re-invest the majority of your profits on an on-going basis and use a long term returns approach.
  • It’s alright to put some of your wealth into speculative investments, but make sure that if these turn bad, you haven’t exposed yourself too much.
  • Do not commit funds from the sale of one property to finance another until settlement on the first one occurs.  Commercial property transactions can be more complex than residential transactions, and can take longer to complete.  Bridging finance can be expensive at high interest rates.
  • A handshake is a good way to end a meeting, but is not the way to finalise commercial property discussions.  To legally protect yourself, always have a solicitor prepare and execute contractual agreements when closing a transaction. 
  • Be careful if considering a variable-rate mortgage. While these may sometimes offer better initial interest rates than a fixed-rate mortgage, a spike in interest rates could result in a significant financial burden. To determine if a variable-rate mortgage is appropriate for you, consider what impact different interest rate increases might have on your finances.  Consult a financial advisor or lawyer to get advice on your specific financial situation.
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