In the world of commercial property investment, one of the gravest mistakes you can make is hesitating to seize an opportunity when it presents itself. Allow me to illustrate this point with a recent example that highlights the importance of decisive action in property investment.
The Missed Opportunity: Three to Five, The Parade Minehead
Several years ago, I examined a property located at three to five, the parade Minehead in Somerset, alongside a client. At the time, the property was listed for sale at £525,000 to £550,000. Despite generating £45,300 in rent, there were potential voids that could reduce the income to £23,310. However, I saw potential in regearing the leases and securing a tenant for the vacant unit, which could increase the rental income to £50,000. Additionally, the property included an old coach house at the back, offering redevelopment potential.
The Proposed Strategy
My proposal was to purchase the property, restructure the leases, boost the rental income, and subsequently remortgage at around £590,000. I advised my client to consider acquiring the property at £450,000. This strategy promised a return on capital employed of approximately 62.54%.
The Client’s Hesitation and Its Consequences
However, my client opted out of the deal due to uncertainties about Minehead’s market viability. They sought a property where they could swiftly recover their investment, which this opportunity did not seem to offer.
The Outcome: Opportunity Lost
Fast forward to February 2024, the property resurfaced on the market, now listed at £625,000. In December 2021, it was purchased for £440,000. The new owner took proactive steps, including combining the beauty studio and cafe into a health food shop, securing a five-year lease at £32,000. Moreover, they leased another unit to a vape shop for ten years, with rental income increasing from £14,000 to £15,000 annually.
Lessons Learned: Seizing Opportunities in Commercial Property Investment
These initiatives significantly enhanced the property’s income potential. Instead of the initial £23,310, the property now generates £46,000 to £47,000 in rental income. Furthermore, the new owner secured planning permission for residential use of the old coach house, enhancing the property’s value.
The missed opportunity highlights the importance of seizing potential investments. Despite uncertainties, taking calculated risks and exploring possibilities can yield substantial rewards. Investing in commercial property entails risk, but it also offers significant potential returns. It’s essential to be proactive, innovative, and willing to explore various strategies to maximise returns.
Conclusion: Bold Action in Property Investment
This story serves as a reminder to property investors: when you spot an opportunity, don’t hesitate. Engage in thorough due diligence, consult with professionals, and be prepared to take calculated risks. Success often rewards those who are bold enough to seize opportunities and navigate challenges with patience and determination.
If you haven’t listened to our podcast then you can do so here.
