In our previous article we discussed how Self-Storage Facilities are an excellent investment for someone with a solid amount of capital to invest, but someone who doesn’t want to spend a lot of time taking care of the facility. Strip Malls are similar in the sense that they provide a great way to establish a residual income, and they also share a relatively high initial investment. Strip Malls have been gaining traffic over the past few years with the declination of traditional shopping malls.
Why Strip Malls?
Strip Malls have become a staple in errand life. They offer a quick and easy way to pick something up without having to drive miles or walk into a mall and search around. They allow for a wide variety of shops to be put in that are able adapt according to the community. For instance, a sports bar that shows the best sports games on big TVs with hot wings and beer will work great in a college town, but probably wouldn’t do as well in a town where the average age is 55. Strip Malls are taking over where traditional shopping malls have failed, and are regaining popularity. The adaptability of Strip Malls makes them a very attractive investment, because the investor can be ensured that as times change the stores within the Strip Mall are able to change with the times, and stay up to date.
People are now able to order clothes online and so they are less inclined to travel to a mall. However, groceries are still a must, and shopping malls often reside near grocery stores, or in areas that are frequently traveled so there is always good traffic near your strip mall.
What are the benefits of purchasing a Strip Mall?
There are a variety of benefits to owning a Strip Mall. For one, they are very easy to manage. If you decide to build the Strip Mall on your own, make sure that you build it in an area of high traffic that is easy to difficult. You will only increase the amount of money each store makes by placing the strip in an area that is high traffic and easily accessible, which will make the open spots in the strip high demand, which in turn allows you to have higher monthly payments; a win-win-win situation between you, the store, and the customer! After your location is selected begin to advertise the space you have in the mall for stores to move in, keep in mind a variety of stores, or stores that go together, for example a gym and a nutrition store, are good things to look for.
If you go the route of buying an existing strip your management and entry time is cut in half! You no longer need to worry about picking a good location or hiring a contracting and Construction Company to build the facility because it is already built! There is also a very good chance that there will be existing stores that will stay in the mall even with the change of ownership. This is one less item on your list to worry about and will free up time for you to do things that you want to do!
When managing a Strip Mall, a residual income becomes reality. After the initial work is finished, it is easy street from payday to payday and the only work that is required is collecting the paycheck. This allows for you to partake in hobbies and spend more time relaxing or with your family while you earn money because of the smart investment that you made.
What are the risks of Strip Malls?
Similar to Self-Storage Facilities, the biggest risk for Strip Malls is the overhead cost. It can be expensive to buy a current Strip Mall because you are essentially paying for the building, the stores, and the money that the owner could be making overtime. Often times an attractive offer is required in order to compel the buyer to comply to your request and to sell you the mall. The price for building a new storage facility is expensive as well, the price to buy the land, prepare it, and construct the building are expensive too, but this also puts you in the position of the owner if you ever need to sell. The bright side of the high investment is that for a year or two all of the payments will be repaying you for your investment, and after that everything made is pure profit in your pocket!
Unruly tenants can also be a problem. If you fill your Strip Mall with stores, and there is one particular store that is always late on payments, is loud or obnoxious and drives other customers away, it can be a big headache. This could also force other stores to move out because they are losing customers as well. The best way to avoid this is to be very thorough with your interviews and applications in order to weed out all of the bad apples. Be long to hire and quick to fire when it comes to stores, because the last thing you want is to have to spend time and energy worrying about particular owners within your Strip Mall.
How can YOU get involved in Strip Malls?
As discussed previously in the article, investing in a Strip Mall can be as easy as buying an existing one that you feel is in a good location and is doing well. Another option would be to build your own. The pro of buying an existing facility is the lower amount of capital required and the benefit of not having to fill every store, but the cons are the location or current stores could not be as successful as you might think. The pro of building your own is being able to choose your own location that works well for you, and the con is the initial capital required can be very high.
The most important factors of getting involved in Strip Malls is due diligence. Be sure to research how well an existing strip mall is doing, or if a location you are considering will continue to be high traffic. Also take your time in the investment and don’t rush! Hiring a bad tenant or purchasing a Strip mall in a bad location can be detrimental to your success and should be avoided at all costs, be patient!
Rent Honcho | Team
King of the Rent Management Jungle!