Buying a factory is not always an easy decision, most people would argue that the manufacturing industry is rather limited in its potential as a good investment. However, the truth depends on the line of business that you are choosing. With the right amount of research, you should be able to turn out a really good profit with your first factory. Here however are four major considerations that you must make if you are to reap good profits from this investment in the long term.
What’s in your budget?
When it comes to buying a factory, your budget really needs to be relevant to your location. If you are buying a factory in an area where the going rate for real estate are high, it is only natural that you should have a high budget. The reality about buying a factory is that you should be able to afford it. If you rely on loans and credit for this endeavor, chances are that you will hit some major financial snags when you need to start operations. So unless you cater for all those in your budget, and ensure that you have all the funding that you need, please avoid half-baked spending here.
The only way for that factory to make profits is for it to start operating. This means that buying the factory without a solid funding option for the operations is an especially bad idea. Generally, before you buy a factory, include the opening cost in your budget so that you can open and start making profits as soon as possible. The last thing you need is to have an idle factory building with no funding to operate it.
Make considerations for long term value
One of the greatest mistakes that people make when buying property is failing to look at the long term value that it will afford them. If you are buying a factory to rent it out, you may be tempted by the prospect of consistent income when you have a renter. You may even rush to buy a building because of the current leasing prospects and demand. The main question however is what if that tenant leaves? What would happen to that factory if your tenant vacates it?
The best option for you is to buy a factory building that is sustainable in demand. You should be able to find another tenant at a reasonable price with ease, meaning that you cannot invest in a location that is too remote or a factory building that is too specific. In this case, you may want to consider being a flexible landlord by allowing your tenants to make reasonable modifications that can be reversed when they want to leave. This will afford you some long term business even in the event that your first tenant leaves. Current leasing rates may be a good indicator of the value of your intended factory building, but the real determinant should be its long term value.
The importance of a good location
Just like when buying residential or commercial property, a good location is really important for a factory. This means that you really need to do your homework before investing. First, you have to ensure that the area has a good transport network. This applies whether you are renting or operating the factory by yourself. Also, consider utilities like power and plumbing as well as security. Over the past few years, there has been a general concern over the migration of industrial areas. A lot of industries have been seen to vacate one part of the city in favor of another.
Well, this should not be a big problem. Most factory buildings can be easily converted into lofts or offices if need be. This means that your investment is not lost in the long term. The key factor for consideration here however would remain the location. You may not be able to get tenants for offices or lofts if the building is in a remote and inaccessible location with bad transport and no utilities.
Adaptability is great for investment
If you are buying a factory building that can be modified into a residential or commercial building, you will notice that you have less to fear in terms of the future of your investment. This means that after all, has been said and done, before you buy that factory you need to ensure that it can be easily adapted to suit the needs of an emerging industry whether it is residential, commercial or even institutional. As such, buying an overly specialized factory building may not be a good idea unless you are ready to take on the involved risks.
In the long term, investment is all about future prospects for profitability. This is specifically why you need to be very careful when checking out any industrial property for sale in Toronto. Sometimes, the most obvious investment may not be the best one. Do your homework first, and ask all the right questions – just to be safe!