Manage your industrial property now for better selling value in the future. Industrial property investors must be aware of what is required to maximise all aspects of a property’s value over a period before deciding to sell.
Tony Bales of Epping Property, says that investors often make the mistake of deciding to sell their investments before realising their real value. “Unlike residential properties, industrial properties have longer term leases in place. This puts constraints on large-scale changes and initiatives to add value quickly.” Bales explains that an industrial property’s value is directly related to its capacity to maximise future income (rental) flows.
Industrial Property Value Maximisation = Deriving best Cashlow potential
What are the major aspects that affect the generation of future cash flows and rentals? “One needs to start with paperwork,” says Bales. “A good, neat, efficient filing system is required for each industrial property. Documentation ideally includes current plans of the entire industrial property. In addition correct measurements of actual and rentable space and copies of title deeds and a thorough understanding thereof is always useful.”
“The single most important aspect is that of making sure all the leases are 100% complete and include all aspects of one’s agreement with a tenant – in writing. The contract must be correctly signed by all signatories. It is also advisable to note on the lease where the deposit will be kept as after a lease has run for five or ten years this can be difficult to trace. When one sells an industrial property, the leases on the property become the single most important aspect of the asset’s value.”
“Finances need to be up-to-date as well as all payments of municipal charges. Even if a tenant pays municipal costs directly to a municipality, it is the ultimate responsibility of the landlord to ensure these payments are up-to-date. Rates clearance certificates will not be granted to the seller if there are any payments outstanding. New owners will also not pay a good price for a property where tenants are in any form of arrears.”
Don’t forget the building’s cosmetic appeal
Bales further advises that building cosmetics, and the visual outlook is always important. “These include painting the parts of the property that have not been attended to for a while. As well as renovating central and entrance areas. Good landscaping and aesthetics always give a good impression as well as making tenants happy occupiers. Remove all clutter and clean where necessary – first impressions do count in industrial as well as residential property. This will be for both prospective tenants during ownership as well as one’s purchaser at the end of one’s ownership cycle.”
“Additionally, one must maximise the income potential of one’s industrial property. Is there additional land on the site that can be built upon? Can one create additional parking? Could anything extra be added? In particular circumstances, owners have even purchased properties purely to erect a visible signboard. Subsequently, it is rented out at a huge premium and the property is sold at a significantly higher price.”
“Before selling an industrial property, owners need to ensure the above factors have been considered,” concludes Bales. “Depending on the property, many of these aspects are only able to be implemented over time. If they are left too late one may just be looking at achieving a lower selling price.”