1. Start With Your Objective
First, understand why you want to buy commercial property.
Are you looking for:
- Rental income?
- Long-term capital growth?
- A freehold asset?
- An owner-occupied property?
- A property that can potentially be repositioned?
- Diversification from other investments?
Different objectives can lead to very different property choices.
An investor focused on rental income may look at a property differently from an owner-occupier who wants a suitable premises for their business.
There is no single commercial property strategy that works for everyone.
Start with the objective, not the property.
2. Know Your Available Capital
Your budget is more than the property's asking price.
Before searching, understand how much capital you are prepared to commit, including the costs associated with acquiring and holding the property.
Consider:
- Available cash
- Financing requirements
- Buyer's Stamp Duty
- GST where applicable
- Legal and transaction costs
- Renovation or fit-out
- Ongoing property expenses
- Cash-flow requirements
It is also important to consider how much financial flexibility you want to retain after the purchase.
A property that uses almost all of your available capital may leave you with less room to handle vacancies, unexpected costs or future opportunities.
The right property needs to fit your financial position, not just your maximum borrowing capacity.
3. Decide What Type of Property Fits Your Strategy
Commercial property is not one single category.
Depending on your objectives, you could be looking at:
- Retail
- Office
- Industrial
- F&B
- Shophouses
- Mixed-use commercial properties
Each has different characteristics.
A retail unit may depend heavily on visibility and foot traffic.
An office may depend more on accessibility, building quality and tenant demand.
An industrial property may involve considerations such as approved use, loading, ceiling height, floor loading and operational requirements.
A shophouse can have its own combination of land value, tenancy, heritage considerations, tenure and redevelopment potential.
Choose the property type based on your strategy rather than simply buying whatever looks attractive.
4. Define Your Location and Property Requirements
Once you know your strategy, narrow down where and what you want to buy.
Instead of saying:
"I want something in a good location."
Try to be more specific.
For example:
- Budget: $3 million to $5 million
- Property type: Retail
- Location: District 1 or 2
- Tenure: Freehold preferred
- Size: 1,000 to 2,000 sqft
- Objective: Investment
- Target rental: Sustainable rental income
- Other requirements: MRT proximity and good tenant demand
The more clearly you define your requirements, the easier it becomes to identify opportunities worth investigating.
And if you don't know your exact requirements yet, that's okay.
Your first step may simply be to identify what you don't want.
5. Set Your Investment Numbers
Once you have defined your requirements, establish the numbers that matter to you.
This could include:
- Purchase price
- Gross rental yield
- Estimated net return
- Monthly rental
- Financing cost
- Holding period
- Expected vacancy
- Acquisition costs
- Potential exit price
But don't turn these numbers into rigid rules.
For example, saying:
"I will only buy if the yield is above 5%."
could cause you to overlook a property that may suit your strategy better.
Instead, use the numbers to understand why the investment works or doesn't work.
A target yield can be useful.
It should not replace proper analysis.
6. Decide How Much Risk You Are Comfortable Taking
Every commercial property investment carries some level of risk.
The important thing is understanding which risks you are taking.
For example:
Tenant risk
- What happens if the tenant leaves?
Rental risk
- Can the current rental be sustained?
Lease risk
- How much tenure remains?
Market risk
- What happens if property values or rental demand change?
Liquidity risk
- How easy will it be to sell?
Property risk
- Are there restrictions or physical limitations affecting the property?
The objective isn't to eliminate every risk.
That isn't realistic.
The objective is to understand the risks before you commit your capital.
7. Have an Exit Strategy Before You Buy
This brings everything together.
Before buying, ask:
"What do I want this investment to look like when I eventually sell?"
Your exit strategy could involve:
- Selling after a certain holding period
- Selling when the property reaches a target value
- Selling after a tenancy event
- Passing the asset on as a long-term investment
- Selling to an investor
- Selling to an owner-occupier
The important thing is to think about the future buyer.
A property that works for you today should ideally have a reason to remain attractive to someone else later.
Buy with the exit in mind.
The Lightbulb
Stop Searching for a Property. Start Searching for the Right Property for Your Strategy.
This is probably the biggest lesson from this entire series.
It is very easy to start with:
"Show me what is available."
But that puts the available properties in control of your decision.
A better approach is:
"This is what I am trying to achieve. This is my capital. These are my requirements. Now show me which opportunities fit."
That changes the way you search.
Instead of chasing every attractive listing, you can filter opportunities based on your own investment strategy.
And sometimes, the result may be that you should wait rather than buy.
That can also be a valid investment decision.
The Bottom Line
A commercial property investment strategy doesn't have to be complicated.
Start by understanding:
What do I want to achieve?
How much capital am I prepared to commit?
What type of property fits my objective?
Where do I want to invest?
What numbers matter to me?
What risks am I prepared to take?
How do I eventually want to exit?
Once you have clarity on these questions, property searching becomes much more focused.
You are no longer simply looking for a commercial property.
You are looking for the right opportunity for your strategy.
If you are still defining what that strategy should look like, you don't need to have all the answers before starting the conversation.
You can share your budget, objectives, preferred locations and requirements with me, and we can work through the type of commercial property that may fit your criteria.
Call or WhatsApp Patrik @ 9328 9376This article is for general information only and should not be taken as financial, legal or tax advice. Buyers should obtain independent professional advice where appropriate.
Series 1 Complete — What Comes Next?
Over the past 10 articles, we've looked at the fundamentals of commercial property investing — from understanding rental yield and assessing tenants to comparing properties, avoiding common mistakes and building an investment strategy.
But knowing how to assess a commercial property is only one part of the picture.
The next step is understanding the opportunities themselves.
In Series 2, I'll take a closer look at some of the characteristics that can make certain commercial properties interesting — including scarcity, tenure, rental yield, location, tenant demand and resale considerations.
We'll start with a question that is becoming increasingly relevant for buyers looking at Singapore's prime commercial locations:
Why Are Strata Commercial Units in the CBD Becoming Harder to Find?
Not all commercial property is the same. And when the supply of individually owned strata commercial units becomes more constrained, understanding what you are actually buying becomes even more important.
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