Commercial properties are mainly seen as a longer-term (at least three year) investments. And you tend to buy them for their regular, high yields; as well as for some good capital growth over time.
Even so, an investor with a little knowledge and experience can easily find properties able to be "upgraded" and then on-sold for a quick gain.
Typically, this would involve you in improving the income stream from your property; and perhaps the security of that income. Both of which would result in a boost to the property's overall appeal and value.
Your Options for a Fast Turnaround
There are a number of different ways you can achieve this.
- Undetake an Upgrade
The simplest strategy would be to buy a run-down property on a short-term lease, and renovate it. More often than not, you can keep the existing tenant; and simply extend the lease on a higher rental.
- Properties are sometimes Under-let
Alternatively, you might be able to find a property with a lease that does not reflect current market rental. Renegotiating that lease would lead to a higher rent, thereby boosting the value of the property. And naturally, longer leases and better-quality tenants will always make your property worth more.
- Maybe Poor Management
Quite often, you will also come across some poorly managed properties.For example: A block of shops might have several vacancies, or tenants who attract little business. Changing the tenancy mix (to improve the area's appeal) tends to attract better tenants, and will also bring in higher rents.
- Watch for Emerging Trends
Simply spotting opportunities within improving (or growing) neighbourhoods — such as inner-city suburbs enjoying an influx of upmarket residents — is another good short-term strategy.
- Initiate Strategic Vacancies
With experience … you may even look to buy vacant buildings, "trick them up" and lease them out. But you should really engage a team of experts, to guide you with a strategy like this.Then you can decide whether you wish to hold them as long-term investment; or turn them over, to make a short-term profit.
- Perhaps a Change of Use
By using a little imagination, you can easily discover ways to completely change the use of a property — by turning a warehouse into a restaurant, for example, would also serve to significantly boost of the property's rent andvalue.
- Study Market Cycles
Timing the market is another viable short-term strategy. As with the share market, Commercial property can go through periods when values may not change much, followed by periods of sharp appreciation. The secret lies in knowing where you are in the current cycle.
Bottom line: As you will have noticed, none of this is exactly rocket science. But hopefully, it provides you with the framework to perhaps think "outside the box" with some of your own acquisitions.