Investing In Commercial Property: Is It The Right Choice For You?
For a long time, property has been proven to be a sustainable form of investment. While for some people, buying properties to let is a career, for others, it is another branch of income on top of their typical day to day salary.
When most people think of property investment and buy to let, they think of residential letting. While this is undoubtedly a popular and usually fail-safe way of investing any spare cash, many are turning to commercial lettings for more security and higher yield, particularly at the moment when the housing market is so unstable.
A commercial property is bought and rented out to other businesses. This may be in the form of a retail unit, warehouse, garage or offices. Apartment blocks also come under the commercial umbrella, as do mixed use premises. In most cases, a particular type of mortgage will be required due to the higher price of the property. Most landlords will use the money paid to them in rent by their tenants to pay off their mortgage. In the majority of cases, the landlord will charge the tenant more in rent than the cost of their mortgage, to cover any management fees, repairs and maintenance and of course, make a profit.
Commercial premises often need less management and input than residential property, as the tenants or occupiers will do a lot of the footwork regarding refurbishing and maintaining it to make sure it is suitable for their business needs. However, you do need to be prepared to put your hand in your pocket for structural or other major repairs. The length of the tenancy is usually longer than the 12-18 months offered in many residential properties, which means you are not continually tidying up in between tenants, nor are you spending time advertising for and vetting potential occupiers. It is worth noting, however, that the vast majority of commercial properties are owned by other businesses or collective ownership schemes, which may reflect how costly it can be, at least in the beginning. Saying that – there is no harm in you going to view commercial properties for sale and seeking further financial advice from the experts!
It is essential that you talk to people in the area and find out whether there is a need for it before you spend your money. You also need to ensure that the property is structurally sound and unlikely to need any significant work done in the near future. The longer you spend repairing or restoring a premises, the longer it will stay empty and not bring in the cash. It is also essential to make sure you have done your research about the area and whether there would be interest in your property. If the location isn’t quite right, the rent is too high, or the layout of the building is not correct, you may find yourself stuck with an investment that doesn’t make you the returns that you projected.