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How To Thrive As An Industrial Property Landlord

You have decided to expand your investment portfolio via industrial property. Amazing! Investing in industrial property is a fantastic decision because of the return on investment. "The earnings potential is significantly higher on commercial properties. The Capex rate in South Africa is currently +11% for commercial properties, versus 5-8% for residential properties," tells Ooba Home Loans.  

 

Also, when it comes to industrial properties, leases are usually longer and rental income is higher. The boom in online shopping has caused many businesses to expand into warehouses, increasing the need for industrial properties all over the country. 

 

However, just because the industry of industrial property is lucrative, doesn't mean it's easy. To thrive as an industrial property landlord, you've got to take heed of these six points:

 

Choose The Right Property: Know What Renters Are Looking For

Start your journey off on the right foot by choosing an industrial property that ticks a lot of boxes. Location, electricity, and security are some of the top items on many businesses' wish lists. 

When it comes to your location, it's essential to ensure your investment property is easy to get to. Being in close proximity to highways and public transport hubs makes a property more attractive in the eyes of renters. 

South Africa doesn't have the most reliable electricity grid, and businesses are tired of the downtime. Having a property that's equipped with alternatives like solar panels, a generator, or a battery is a huge boon. 

Security systems are essential. This makes business parks and complexes stand out in the property game. Choosing a property in a secure business park can help lift the burden of security. 

Deciding on an industrial property type is also an essential aspect of choosing the right investment property. There are warehouses, distribution centres, manufacturing facilities, and flex spaces. What you decide on will depend on your price range, what's available, and your investment goals. 

 

Click here for more key factors renters consider when deciding on industrial space.

 

Get Clear On Maintenance Responsibilities And Pull Your Weight 

As a landlord, it's crucial to take responsibility for maintaining your property. Neglecting proper maintenance can result in significant challenges for both you as the landlord and your tenants. Industrial property maintenance involves the diligent practice of keeping buildings safe and fully functional for their occupants while ensuring compliance with the relevant property laws.

The owner of an industrial property bears the responsibility of undertaking tasks necessary to maintain the building in the condition for which it was originally leased. This encompasses addressing wear and tear issues like fixing roof leaks, addressing dampness, performing exterior painting, and handling fence repairs, for example.

Also, the landlord is accountable for ensuring that the property remains in compliance with prevailing health and safety regulations when it's occupied by a tenant. Taxes associated with the industrial property need to be handled by the landlord, too.

 

Have A Clear Contract In Place

Compared to residential lease agreements, industrial property contracts are often more complex. 

When drawing this contact up with your property broker, make sure you know exactly what's in it including renewal options, rent escalation clauses, additional charges, what maintenance you'll be responsible for, what maintenance your tenant would be responsible for, and any repairs you'll need to accommodate. 

Knowing exactly what's expected of you and your tenant can help ensure a prosperous business relationship. 

 

Have Industry Professionals On Your Side 

To make sure you make the right investment decision and ensure you get a great tenant, it's important to work with an expert who knows the industrial property industry. 

Here are just some of the benefits:

  • Brokers have access to a wide range of property listings, including off-market and exclusive deals.
  • Brokers can save you time by pre-screening properties, arranging viewings, and handling negotiations.
  • Experienced brokers are skilled negotiators and can work to secure favourable terms.
  • Working with a knowledgeable broker can reduce the risk of making costly mistakes during the investment process.

 

Make Financial Management A Priority 

Success hinges on timely rental collection and allocating funds accordingly. Ensure that a system is in place to ensure municipal rates and taxes are paid promptly, and put savings aside for maintenance and potential vacancy periods. Having a financial buffer when a tenant leaves a property can mean the difference between settling for the first tenant that comes your way and a tenant that you can have a successful business relationship with. 

 

Retain Tenants

Retaining your tenant in your industrial property is important as it translates to lower marketing costs, decreased risk of problem tenants, less admin, and a steady income.

To reduce tenant turnover, take the time to build a relationship, address questions and concerns promptly, and offer incentives to long-term tenants.

 

Diving into industrial property is a great decision for a diverse investment portfolio! However, it's so much more than just buying a property and leasing it out. Follow the above steps to ensure you don't just become a landlord, but a thriving landlord!

 

Contact us today! API Property Group specialises in industrial and commercial property throughout Johannesburg, Pretoria, Durban, Cape Town, and Port Elizabeth.


13 Nov 2023
Author API Property Group
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