If you work as a broker in commercial property investment sales, you will know that the industry segment is quite specific and parts of your day should be focused just on particular properties, certain prospecting actions, and a particular profile of client. Everything you do should be centered on the finding the right people to help in the performance of their properties.
The clients and people to serve in commercial investment sales are ‘investors’ first and foremost; the properties that they own and purchase are a means to an end. It is your job to know how to find the right assets to purchase and own, and then improve property performance.
What Do Property Investors Want?
Typically property investors will have a big concern about:
- Property prices
- Market rental
- Lease documentation to drive rental returns
- Net returns for the property
- Yields and capitalization
- Highest and best use
- Vacancy factors
- Occupancy costs
- Tenant mix
Some properties in your local area will perform better than others or have a definable future as an investment. It is your job to understand those factors, and then match the properties and the clients to help in the investment process. Good properties will usually have a high price at sale in comparison to rental return, and that will keep the yield ratio relatively low. Good investment properties selling in a buoyant market will usually achieve yields around 6% to 8% of passing net income in any market. It is your job to watch those ratios to see what is being achieved and why that is so. Less attractive investments will rise over 9% or 10% as a ratio of net income to potential sale price.
Essential Questions to Ask Yourself
Consider these questions in relation to investment property sales:
- What is the future supply and demand for local investment property in your region?
- When you compare office, industrial, and retail property, where will the best returns be for your clients?
- What are tenants looking for particularly in leasing premises that could impact the success or otherwise in improving the net income for a property?
- What are market rents doing right now and how is that expected to change?
- How can you improve a property for the long term so that the net income improves?
- How are outgoings impacting occupancy costs today and what flow through is that having to the yield factors or return on investment?
- Are there any changes to property zoning in the region that could change the sale prices and therefore the investment profiles or returns for your clients?
To be a good agent in investment property sales you really do need to know about the ‘technicalities’ of improving property performance locally, and that can be in office, industrial or retail property.