Recession-Proof Your Commercial Property Portfolio by Mitigating Risk
by Mish Daniel | Free Information
In our latest video, Mish Daniel, founder of Revolve Commercial, hosted another jam-packed session and shared her expert insights and practical tips on how to recession-proof your commercial property portfolio.
With years of experience working with thousands of commercial property owners, Mish is best known for her ability to help clients build wealth and earn great cash flow on autopilot through commercial real estate.
Whether you’re a seasoned investor or just starting, Mish’s insights and strategies for mitigating risk and protecting your investments during economic downturns will help you increase the value of your property, lower your risk, and identify the best tenants to have during downtimes.
Listen to the full conversation below, or keep reading. 💡
How to Increase the Value of Your Portfolio
Purchase a Leased Property
Buying a property with a lease already in place is a good way to increase your portfolio’s value. Because the lease guarantees an income for a certain period of time, you won’t have to worry about finding tenants or paying for vacant periods. However, it’s important to know the terms of the lease and to check the tenant’s financial stability to weigh the risks against potential rewards.
Invest in Prime Positions
There are various factors to consider in different property sectors. For instance, retail properties benefit from being in prime locations with significant traffic while industrial properties require adequate parking, truck access, and cargo storage space. Understanding the specific needs of each sector is crucial when considering investments.
Market Research & Due Diligence
It’s crucial to understand the market if you want to make informed investment decisions and avoid potential pitfalls. You can find out how many properties or businesses are in the area and examine how trends are influencing the industry. Suppose you’re interested in purchasing a property that comes with a print shop. It’s worth your time to research how well the print shop is performing and determine whether they have a diverse lineup of offerings.
Tenant Calibre and Lease Term
When considering a property, it’s important to factor in both the quality of the tenant and their understanding of the lease agreement. One effective way to maintain stability and avoid conflicts is to discuss the pros and cons of extending their lease term while providing alternatives. It’s essential to clearly explain all options to ensure straightforward communication and avoid any misunderstandings.
With lease terms, tenants are empowered to pick the best option that meets their needs while also safeguarding both the landlord and tenant. Ultimately, this forms an agreement that benefits everyone involved. In our upcoming sessions, we’ll delve deeper into the world of lease structures. There is much to cover so keep an eye out for our future session to learn more about lease structures.
Value-Add Strategies, Flexible Design & Development Potential
Along with finding the perfect location, it’s important to consider the potential for construction and value addition at your properties.
Imagine the possibilities of building additional warehouses or storage areas, or even creating something brand new on the property.
By making the most of every square metre of your property, you add tremendous value.
You can invest in properties tall enough to allow for at least seven to eight metres of space from the ground, consider adding a mezzanine floor (following regulations), provide storage options, or rent parking spaces (if there is high demand in your area).
When you invest in an industrial, office or retail space look out for ones with lots of different doors and exits because it gives you more options and opportunities for growth.
Negotiate Additional Incentives at Rent Review
Prioritise retaining your existing tenants when you take on a new property. Get creative with incentives and build a positive and lasting relationship with your tenants.
Listen to their concerns and find solutions together. Show your commitment to their satisfaction in order to secure long-term rental income and avoid costly expenses like agent commissions and advertising fees.
Pay Down Debts
Pay down debts as quickly as possible to add value to your portfolio. Doing so will reduce the amount of interest paid and improve your cash flow, freeing up more money for making improvements to increase the property’s value.
Lower your Risk when Purchasing Further Properties
Acquiring additional commercial properties is a great way to increase your returns, but it comes with some risks. To minimise the risks you need to:
Diversify Your Holdings
If you want to minimise risk and maximise potential returns, you need to diversify your property holdings. Invest across sectors (industrial, office and retail) to create a balanced portfolio. This way, you can weather market downturns and continue to generate income even if one sector experiences a recession.
Monitor Your Properties Regularly
Maintain your properties and monitor them regularly. Stay on top of market trends and look out for potential risks and opportunities. Adjust your strategy if you need to. This way you will keep your tenants happy, gain profits and minimise your tax liability.
Experienced Professionals who are Valuable and Invaluable Agents
It is important that you and your property managers share the same commitment to keeping the property and tenants safe and secure. Many people have been hurt because their property managers did not do a good job.
Make sure that your manager works in your best interests. The key is to make sure they are valuable, meaning they are worth a lot to you, and invaluable, which means they are indispensable and very useful in helping you reach your goals.
Maintain Adequate Insurance Coverage
It’s important to get the right insurance for your property. Make sure that it covers events like fire, floods, and riots. Also, make sure you are using an insurer who specialises in commercial properties so you have the right help and information.
Prioritise Properties that have a Stable Cash Flow
Prioritise properties with a stable cash flow because a steady stream of income helps you build a successful portfolio. This means you must conduct thorough due diligence on potential tenants, the property, and the overall acquisition. So you can make informed decisions and avoid potential financial losses.
Identifying the Best Tenants for Downtimes
To protect yourself against economic downturns, it is important to be strategic when selecting tenants.
Some businesses are more vulnerable than others during hard times, but there are certain types of tenants that tend to be more stable.
These include government and telecommunications and electrical (TE) tenants, medical and dental providers, e-commerce businesses, healthcare providers, and professional service companies.
These tenants offer continuous rental income and stability, which is crucial during uncertain economic times. When building your commercial real estate portfolio, prioritise properties that cater to these types of tenants.
Don’t worry about navigating this complex industry alone – our team at Revolve Commercial is here to guide you every step of the way.
Remember, we’re here to help you succeed in the world of commercial real estate.
If you have any questions – book a no obligation 15-minute chat with one of our experts at Revolve Commercial. In this call, we’ll address your questions and map out what your potential next steps are to growing your wealth portfolio.
Don’t wait – book your free call today