• Vicky Sidler | theContenTribe

Industrial Property For Sale Or Industrial Property To Let – Which Is Better?

Updated: Sep 8

Buying The Industrial Property That You Are In

Rick de Sousa, Head of Commercial Property Finance at Fedgroup, Gauteng, South Africa, tells Entrepreneur.com “One of the most common scenarios we see is the business owner who has been renting for years, and now wants to purchase the property from their landlord. The problem is that they’ve already invested so much into the building that they’re stuck.”

“They think the property is worth more than it is, and the landlord knows the business is anchored there, which works to their advantage because it drives up the price. In these cases, objectivity becomes a problem.”

In this instance, Mr de Sousa gives the advice that Jones Lang LaSalle, Illinois USA (a property investment company on FORTUNE magazine's World's Most Admired Companies list) would agree with. Look at it objectively – but that is a hard ask if you are very emotionally invested. It will be critical to get an objective third party industrial property agent involved.

Property agents, be it industrial properties or other, are linked to other agents. They hear of upcoming properties that the rest of the market, i.e. you, don’t hear about. They hear about related upcoming legislation changes that you won’t know about. They know the ins and outs of a good or a bad property contract. They will also know if the landlord or seller has a dubious history. They will have worked with clients before you have had the challenge of filtering out the emotion.

The fear of the hassle and cost of the move might be real, but so will the future impact of a bad business decision.

When You Shouldn’t Buy An Industrial Property

Rob Fenner, of Jones Lang LaSalle, cautions that you should be very prudent in your analysis of what is driving you to purchase. Is it an irritation at paying the bond of someone else? If yes, then that is an emotional factor, not one based on financial or business plan.

Does it have a drop-dead gorgeous frontage onto the road and make you feel proud to be its potential owner? Step away slowly, no sudden moves. You need help.

It can be very hard to be utterly objective when viewing properties as comfort, curbside appeal, and moments of unfounded hope are delightful human factors that can fog up your business goggles.

It is best to have an impartial third party, preferably an industrial property agent or industrialist business advisor, to filter away the personal choices from the business choices.

Buy Your Industrial Property With Another Business

Suraj Lallchand of Fedgroup Ventures, via Entrepreneur.com, gives sterling advice to a) own an industrial property and b) keep it in a company separate from your operations company.

Lallchand explains further “ The reasons for this are simple...tax deductions, a second income stream and … allowing the business owner to one day sell the business while maintaining the property portfolio they have built up…if the business is sold you, the property owner, can continue to draw rental income from the new owners.”

As an example, The Creative Counsel, South Africa, sold their business to the conglomerate Publicis, France. The premises was excluded. The new owners’ business model was to not own property, so it was a win-win with The Creative Counsel gaining long term passive income.

Passive income is everyone’s ultimate financial goal.

Buying To Grow Your Portfolio Of Industrial Property

Another benefit of owning an industrial property starts the day you pay off the loan. You can bond against it and purchase a second one. The tax benefits continue, and the passive income grows.

A more secure way of owning a new property is to go into it with a tenant involved in the selection process. This means the building that is chosen already suits a business, and the income streams start immediately.

This quick overview is not the be all and end all. It’s just some inspiration to open some doors to broader thoughts.

You should also still keep the rental factor on the pros and cons list. That is a spanner in the works, yes? Should you actually be keeping a rental business model?

There are many business reasons to take into consideration when looking at renting or buying a property. You, as the business owner, will have your hands full with cash flow factors, market timing factors, costing factors, etc. Trying to turn yourself into a property specialist overnight by trolling through Google is going to frustrate you and give you suboptimal results.

If you want to take the stress out of Industrial Property decisions In Gauteng, if you want to stop the For Sale or To Let mental tennis, use a qualified, registered, experienced, successful professional agent. For reliable advice, sound guidance, or just a bump in the right direction, get hold of Sandro Mendace, Gauteng. He is a qualified Master Practitioner in Real Estate and holds a Bachelor of Technology in Marketing with 17 years’ experience in real estate and financing. Contact Sandro on 082 8998 304 or sandro@mendace.co.za.

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