Real Estate Investor Magazine South Africa May/June 2015 | Page 44

ACQUIRING

Buying
Commercial Property?
Avoid these five costly
mistakes
BY ATTIE ANDERSON

B

uying commercial property is a long-term
commitment and a major investment for any
business; therefore, such a decision needs to
align with the businesses’ growth objectives.
“Being in a position to buy commercial property
is an exciting phase for a business as this creates new
possibilities. In some cases, commercial property buyers
make impulsive decisions based on emotions rather
than sound business objectives. During the decisionmaking process, it is important to remain focused on
business needs and not overlook the finer details which
can have long-term limitations on business growth,”
says Attie Anderson, Head of Business Lending of
FNB.
Paying attention to some of the following areas can
help commercial property buyers avoid costly mistakes:
1. Commercial use, title deeds and town planning
restrictions
Ensure the property is zoned for commercial
use and investigate any potential town-planning
restrictions for the chosen area. This will give you
a good sense of whether your business can face
growth restrictions in future.
2. Size of the property must accommodate business
growth
Depending on the type of business, you need to
consider the business’ growth potential and whether
the targeted location can accommodate such
growth. It is not advisable to buy property only to
sell it a few years later because you can potentially
lose money. Sourcing new properties comes with
additional costs such as agent’s commission and
transfer costs.
3. Location and accessibility
A location might be better suited to the business
but not necessarily convenient or accessible to

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MAY 2015 SA Real Estate Investor

employees or clients. This can be detrimental
because you can end-up investing more resources in
transport or losing talent due to the inconvenience
of the business location. Similarly, you want to
ensure easy accessibility for your clientele since this
has a direct impact on the future of your business.
There needs to be a fair balance.

“The objective is to make
substantial profit from the
sale of the property.”
4. Do not overpay
The objective is to make substantial profit from
the sale of the property. This is why commercial
property buyers need to understand and research
the potential value of their targeted property to
negotiate a reasonable price. Banks play an essential
role in this regard because they use independent
property evaluators to ensure the buyer has a good
idea of the property’s value.
5. Understand upfront and ongoing costs
There are upfront costs that need to be settled by
the buyer during a commercial property transaction.
These include transfer and registration costs which
largely depend on the sales price.
“Acquiring commercial property is a
significant step in the life cycle of any business
and it is important to ensure all factors are taken
into consideration. Business owners must enlist all
the necessary help to ensure they make the right
decision, especially in view of the long term nature
of property investments,” concludes Anderson.

RESOURCES
First National Bank (FNB)
www.reimag.co.za