Evaluating a tenanted property starts with the existing lease and evidence of income. Organise the commercial information before deciding whether the asset fits your objectives. This is a general review framework, not a recommendation to invest.
Understand the income being quoted
Ask for the executed lease, amendments and evidence of recent rent receipts. Identify the contractual rent, any concessions, payment history and who holds the deposit. Keep scheduled income separate from income actually received.
Record which costs fall to the owner and which are recoverable from the tenant. Your review should distinguish gross rent from income after recurring owner expenses.
- Check the rent schedule and proposed increases.
- Review payment records and any arrears.
- Identify the owner’s recurring costs.
Review the tenancy with your advisers
Ask a qualified legal adviser to review the tenant’s obligations, remaining lease term, break provisions, renewal terms and the documents relevant to a change of ownership. Confirm how deposits and outstanding obligations would be handled in the transaction.
Consider what could happen if the tenant leaves or pays late. Prepare scenarios for vacancy, marketing, repairs and the cost of making the property ready for another occupier.
Include acquisition costs and the exit plan
Build a total acquisition budget that identifies the purchase price, applicable transaction costs, professional fees and any immediate works. Have your tax and finance advisers review the assumptions relevant to your situation.
Think through who could occupy or buy the asset in future and what information supports that view. Evaluate the property with independent legal, technical and financial advice before committing.
- Compare the property with relevant alternatives.
- Test your budget against lower income or longer vacancy.
- Record which assumptions still need verification.
