A little research and data, combined with a solid plan of action, can turn an ailing property into a cash flowing asset.
Here are three tips to help you succeed.
Step 1: Why is the property not succeeding?
Things that should be considered in this analysis are the condition of the property, the condition of the surrounding properties and submarket, and demographic trends in the area. Does the property have physical or functional obsolescence issues that make it less than desirable for today’s businesses? Has the property not been maintained well compared to surrounding properties?
What’s going on in the submarket that may be impacting this property, as well as others in the area? Are there traffic issues that complicate access to the property? How do the asking rental rates compare to properties in this submarket? These are just a few of the questions that must be answered when performing an analysis of the property’s current performance.
Step 2: What does the market need?
Evaluate the submarket area to see if certain types of business or services are missing. Using real estate market data, demographics, and other sources you can determine if there are specific types of companies that should be targeted as potential tenants for the property.
Step 3: Finding the right use for the property
Your research may reveal that the property is the perfect location for a restaurant. But if the property is an office building, or if it’s a vacant property that doesn’t have adequate parking, a kitchen, or space for a dining area, you’ll have to invest a lot of time and money to create that opportunity. It’s crucial at this stage to perform several financial analyses in order to determine the feasibility of a change of use, renovations to a property, adjustment of lease rates, and many other factors in order to determine what the best option is moving forward. It’s also very important to ensure that the goals of the property owner are considered in these analyses. What sort of resources are available financially? Is this a long term hold? Is the owner focused on cash flow, value appreciation, or both?
Step 4: Create a plan, and put it into action
Based on the analyses and goals of the owner, create a plan of action that represents the best possible outcome for the property. Review the plan with all stakeholders to ensure everyone understands the actions that need to be taken, costs associated with the plan, and what the outcome of successful execution looks like. Also ensure that everyone is aware of potential pitfalls, assumptions that are part of the analyses, and external factors that may impact the outcome of the plan.
Contact the experts at DRK & Company to learn more – we have the knowledge, expertise and resources to guide you through the process of making the best decision possible for your property.