- Be sure you understand any gearing or debt related to the property or fund. A change of interest rates ,valuation or loan to value can have a significant impact on returns and sometimes result in having to sell a building. Mortgages still have to be paid if a building becomes empty for any reason. Not the same problem when wholly purchased with cash.
- Be clear on management costs or administrative charges that may affect your net return and ensure yields quoted are net of any annual costs or charges.
- Be clear on yields quoted particularly if they include Capital or rental growth that cannot be guaranteed.
Length of lease is important and you should understand and be clear on expiry dates and in particular tenants break clauses they can vary considerably. - Quality of tenants in occupation is important be clear on who is responsible for rental payments and the strength of their covenant .
- Be careful in respect of long leasehold interest against a freehold property as you may not be in full control in respect of the future of the building re changes in use future development opportunities etc this may need consent from other that can be costly or not available at all.
- Always take advice from your professional advisors on legal documentation and investment strategies seek acquisition and title reports.
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