When looking to start a project, many investors wonder what things are important to look for when looking at the property itself. Tim Rose of DPC Companies offers advice on how to approach the search for new properties and why it’s important to think outside the box when looking at property types.
When you’re first starting, begin by defining the type of asset you want, whether that be an office, retail or industrial type of space. Once that’s decided, make sure the asset is at a low enough price for your financial position. Be sure you’re able to purchase a property while also being able to finance the updates and renovations your space may need. Always remember to build in an extra cushion for those renos!
Cosmetic renovation or major rehab?
From here, determine whether it is in need of a light cosmetic updating or a major gut renovation. “Once we know what money we will put into it, we know what that’s going to lease for and we can still make a decent profit margin on it,” said Rose.
Location, Location, Location
Then you to need to find well-located real estate. “The saying goes, ‘location, location, location,’” said Rose. “Of course, location is very important, but then I’m looking for the bones of the project.” Just like residential, you’re looking for the right ceiling height, layout, etc. Can these things be corrected if needed? If not, consider continuing your search.
When it comes to aesthetics of a property, Rose advises to not be too concerned with the outside of a commercial building.
“The building we own in Denver Tech Center has an exterior that is dated and unusual, but we put a very modern entry element, gutted and remodeled the building and now it is competitive with all the surrounding buildings,” said Rose.
One element that investors will need to keep in mind, however, are interior and exterior window lines, which are the windows that wrap around the building. Rose said that a property has to have a good window line because it’s one of the most difficult things to change in a property once it’s purchased. If a property does have awkward window lines, however, there are options for getting around it. For those buildings that have low-lying window lines, for example, it can be addressed by adding a darkened blind window treatment on the interior that appears to be partially closed, creating the illusion of a higher window. The best window line is a continued line of glass, offering as much of a view of the outside world as possible while promoting general well-being of tenants. Small changes can completely change the appearance—and opinion—of a questionable property.
In other words, don’t let the interior of a building dissuade you from doing a good deal. The interior of a building has endless potential, and can become just about anything you imagine.
“Buildings are typically four walls and you can use whatever finishes you want to make them contemporary and leasable,” Rose said. “Some we consider painting but not all are able to be painted. So we ask ourselves, what can we do cost-effectively to make it as attractive as possible? There's generally something we can do to adjust it.”
Every building is different, so investors should keep in mind that what works for one property may not work for the next one. As long as the property has good bones, property owners can really be creative when it comes to changing the look and feel of everything else, and molding the property to fit your individual needs.