If you are new to commercial investment, or are thinking about purchasing a commercial property, we have compiled a short guide to assist your decision making.
It may not be the best option for you to purchase the commercial property in your personal name. Perhaps a company or trust should be holding these assets? If you already have an established trust, should those trustees hold that asset, or should there be a new trust? Talk to your accountant and lawyer about this jointly – sometimes the legal and taxation advice result in differing views on ownership structures.
At CS Law we work collaboratively with your accountants and other professional advisors to get the best results for you.
What about Tax?
You should consider the importance of the tax implications of your investment and whether you are developing or leasing. GST registration and returns, plus capital gains tax on commercial property development are all considerations you should make before purchasing. Discuss the pros and cons with us and your accountant, and keep all your professional advisors copied into your correspondence to ensure we are all aware of the advice you are being given.
Tenancies – maximise profits
A tenant, is the ultimate foal for a long term investment. It is important however to consider the length of the tenancy and what type of tenant will best fit the space you are providing. Remember, in commercial buildings, there is the opportunity for tenant-paid fit outs to suit the tenants needs and a much greater emphasis on location ties to profits for the tenant. Some spaces will suit a long term tenant, whereas other spaces may require a more short term tenancy. Get good advice prior as to your obligations as compared with your tenants and we advise getting assistance with the lease. We commonly use a standard firm lease, but it is important we review the terms of any agreement to lease to ensure the terms are adapted to best suit your property and requirements. For example having market rent reviews or CPI rent reviews can make a significant difference to the value of the property long terms.
An efficient and experienced property management firm can be a great asset to your commercial investment. You need to get advice on the cost/benefit of a manager and do your homework on the best provider for you. If you decide on management, ensure you are carefully reading your reports and keep a physical eye on your investment when you can. It’s always important to keep yourself in the loop.
As your solicitor we can look after rent reviews, lease renewals an give advice as needed around your tenants obligations under the lease.