If you’re new to industrial property investing, then make sure you schedule site visits. Think of site visits as part of the research process to ensure you are making the best decision of where and what to invest in.
The idiom “pounding the pavement” means walking the streets looking for a job. But in the property investment context, we like to use this phrase to explain to our investment property workshop attendees that it you have to go out there and “pound the pavement” to get a better appreciation of what is on offer and whether a particular investment property is a suitable investment for you. After all, “seeing is believing”.
It’s best to go on several rounds of site visits if you’re a property investing novice. You’ll learn much more by observing and asking questions. Comparing and contrasting the different industrial units available and weighing the pros and cons will help you to decide which unit is best for you.
Here are 5 good reasons why you should go on site walks.
1. You can assess the property’s condition
Before you purchase an industrial space, review the work that’s been done on the property. By visiting the site, you’ll be able to assess whether the previous owner has made improvements to the space, or whether any minor or major repairs will need to be done. This will help you plan sufficient funds for future works required.
2. You can discover what transport links available
Industrial spaces that are located close to key transport nodes are more attractive and desirable to tenants. When you go for your site walks, check out the distance between the industrial site and the nearest MRT station or bus stop. Are there sheltered paths to the bus stop or MRT station? Will tenants or employees have to walk very far to catch the bus or train? Are there major highways nearby? Is there bad traffic getting in and out of the area during peak hours?
Connectivity and accessibility are very important in attracting tenants. A good location can help you fetch a better asking rental and also boosts the potential for price appreciation of your unit.
3. You can find out more about the tenant mix
Check out what is the tenant mix of the industrial building you are visiting. What kind of businesses or industries are these tenants in? Are they vulnerable to economic cycles? Are these tenants in a trade where it’s easy to move in and out? Are you planning to take over an existing tenant lease should you buy a unit there?
You may also wish to talk to the landlord of other units in the building to make sure that the tenant you are taking on is reliable, not prone to causing problems to other tenants in the building and has no cashflow problems.
4. You can check out the amenities in the surrounding area
While going on your site walk, be sure to see what sort of amenities are around the area. Are there kopitiams, coffee shops or canteens nearby? Can workers easily grab a coffee or a quick breakfast before work? Are they able to get their lunch nearby? Is there a convenience store or 7-11 on the way to the MRT? Is there a childcare centre nearby where workers can drop their children off before they go to work? A unit which is located in an area with lots of amenities will be more attractive for potential tenants.
5. You can review the facilities in the industrial building
Do also find out whether there are recreational amenities in the industrial building. Some modern facilities come with swimming pools and a gym, but these will actually lead to higher maintenance fees. You’ll have to build this into your financial calculations to ensure your rental income can cover all these expenses and that you have left over positive cash flow to make your investment worthwhile.
Site walks are a form of due diligence and reassurance that you are putting your money into a viable investment. The more you see, the more you become aware of what to look out for and you’ll be able to better appreciate and assess the opportunities and risks associated with the investment. You’ll therefore be able to get a clearer picture of what you’ll be getting into.
Of course with COVID-19 still in the picture, sometimes physical site visits may not be viable. Your property agent can sometimes organise online site visits to the building itself via video. But do go check out the surrounding area when you have time on your own. Any property investment is a huge financial commitment. A physical site visit is always more impactful as you can see things with your own eyes. So don’t forget to “pound the pavement”!