Thinking of buying a commercial property? Here are a few things for your checklist.

With so many newcomers buying commercial property for the first time, or perhaps looking for their second property, it seems like an appropriate time to mention what to look for.

Prices can be as low as $350K + GST (if any) in the commercial market, with many businesses preferring to own rather than rent, and investors unable to purchase at this level in the residential market.

It's a good idea for purchasers to keep in touch with their preferred property agent, so that they stay up to date with market factors, such as leasing rates, vacancy levels, and comparable sales.

A tenanted investment is preferable for investors. In fact, it's almost a requirement by the major banks, with leases of a minimum of two years being a pre-requisite. Investors should check whether their bank requires a valuation and/or a seismic report, as this can be overlooked by the time an agreement for sale and purchase has been signed. Alternatively, if an investor has the opportunity to purchase a vacant property, they can minimise their risk by checking criteria such as vacancy levels in the area, the location, profile, number of carparks, and potentially a budget put by for fit out costs.

Although the yield or rate of return is important, investors should check how long is left on the current lease term, rights of renewal, type of rent reviews, and anything additional to the standard agreement. The tenant covenant is significant too, as it'll specify the tenant’s obligations at the end of the lease term.

There are a number of ways a property may be offered for sale.

An Auction has the date and location details provided and invariably due diligence documentation such as the lease document (if tenanted), LIM, property file and property reports available. Potential buyers should allow time for any other due diligence to be carried out and specifically request the agreement for sale and purchase by auction as there may be vendor variations within. Remember that any purchase is unconditional on the auction date and a deposit (usually of 10 per cent) will be required.

A Tender is essentially a type of closed, silent auction and specific tender documents are used. Purchasers are invited to submit their tenders before the close of the tender date. After this date the vendor will consider offers and conditions and decide which, if any, they wish to accept.

Deadline Private Treaty Sale is similar to the tender process. A property is offered for sale with no fixed price and prospective purchasers are required to submit their offers by a deadline date.

Finally, a Private Treaty or Sale by Negotiation is generally a sale with a fixed price. The price won't necessarily be disclosed and there's usually no timeframe.

Given that there are so many variables, Colliers always recommends that purchasers seek legal advice from a lawyer who is specialised in commercial property. And, of course, you're welcome to pick up the phone and chat to me.