Cash Flow is so crucial in commercial property business that it is like having blood in the body, more so during challenging times.
Cash flow enables you to pay your bills and mortgage and enjoy financial freedom with income streams. It also enables you to hold the property longer for capital growth.
Cash flow is king in today’s market enabling you to leverage against other commercial acquisitions, and build your ‘Empire.’
Commercial banks will be favourable as you will have the ability to pay your mortgage. Toxic assets are those that are vacant in your portfolio, especially in the current tight economic conditions, with lenders coming down hard on properties that may have vacant buildings or with the potential to be so.
Try to build your cash flow by concentrating on long term leases and rent reviews. This will enable you to have an added advantage over others, unless you have deep pockets.
Managing your property is crucial. Therefore, maintain your property regularly to ensure that your leases are in order to maximise your cash flow. Visit your property regularly and attend promptly to maintenance issues even if someone else is managing your property. This will ensure that your manager is doing his or her job properly and maintaining the property.
With recession continuing to daunt the market, purchasers are looking for positive cash flow properties, which are becoming more common. Confidence is low and in some cases, values are falling.
However, the latest interest rate drop may restore some confidence.
When pursuing cash flow properties, please ascertain that you have accounted for all expenses. For example, management, repairs and maintenance costs are often overlooked; these can quickly erode your cash flow.
Older properties often require more maintenance. It is therefore important to know, the income required to offset the expenses on such properties.
Consistent income through cash flow properties has always been the key to building wealth and equity. Keeping your property well maintained will ensure you have cash flow, as tenants are now more demanding for less rent.
After all, they hold all the cards, especially in challenging times.
Dealing with commercial property is an art and a specialised field, constantly involving compliance issues and tenant demands.
Experienced professional managers are useful but you should take personal interest in your property, talk to tenants to ensure they are well looked after and check the rentals regularly.
Tenants can make or break commercial property investments and can jeopardise your cash flow and put your investment at risk.
Commercial leases play an important part in determining the value of a building at any time. It is not about bricks and mortar but the right cash flow over the period of the lease.
Mahesh Ranchhod is a Director of the Ranchhod Group of Companies based in Auckland. Phone: (09) 3031353 Mobile: 021525569
Email: m.ranchhod@xtra.co.nz Website: www.ranchhodgroup.com
The Group incorporates New Zealand and Australian Companies and Trusts designed to invest in commercial properties and manage them in Australia and New Zealand. The above article should be taken only as a guideline and not specific advice. Mr Ranchhod absolves himself along with the management and staff of Ranchhod Group of Companies and Indian Newslink of any responsibility or liability that may arise from the above article. Readers should seek professional advice before acting upon any information contained above.
