Investing in Commercial PropertyCommercial property investment has
traditionally been the preserve of the professionals:
the institutional investors like insurance companies, the
pension funds and the church commissioners. But more
recently the benefits of commercial property have started to
become apparent to the
smaller private investors,
particularly those who have experienced the benefits of
buy-to-let and want be a little more adventurous.
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Go to any commercial
property auction nowadays and you will find a new breed of
smaller private property investor enthusiastically joining
the professionals to tuck their money into this market.
Even though prices have
rises considerably (yields have dropped) in a buoyant market
as it now is, there's still bargains to be had if you are
willing to take the time and trouble to find them.
Investing in commercial property has several
positive advantages when compared to investing in
residential property:
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Generally the emphasis is on income - a
higher income than residential property, albeit
generally with a lower rate of capital growth. However,
when you add together the income return plus the capital
growth on a commercial investment, over recent years,
average total returns have been topping 20%.
-
Commercial leases are contractual as opposed to the
statutory regulated ones for residential. This means
that generally the landlord/investor has more protection
if the tenant fails to pay rent or meet his contract
commitments.
-
The
Full Reaping and Insuring (FRI) lease agreement is
accepted as the norm for commercial tenancies in the UK.
This means that the landlord can expect a clear return
on his investment, free from ANY additional costs.
-
Leases are agreed for much longer periods than the
common 6 month tenancy agreement on a flat or house. 5,
ten or even 15 years would not be unusual with a
commercial tenancy, so generally there's a lot less
management involvement needed from the landlord or his
agent.
-
In
addition to a longer lease, it's accepted practice to
review the rent every 3 to 5 years. This means that the
income return on the property is kept in-line with price
inflation and the whole investment acts like a pension.
-
Its
more common with commercial to buy properties already
tenanted.
 |
|
Commercial property investment has
traditionally been the preserve of the professionals:
the institutional investors like insurance companies, the
pension funds and the church commissioners. But more
recently the benefits of commercial property have started to
become apparent to the
smaller private investors,
particularly those who have experienced the benefits of
buy-to-let and want be a little more adventurous.
Go to any commercial
property auction nowadays and you will find a new breed of
smaller private property investor enthusiastically joining
the professionals to tuck their money into this market.
Investing in commercial property has several
positive advantages when compared to investing in
residential property for several reasons:
|
-
Generally the emphasis is on income - a
higher income than residential property, albeit
generally with a lower rate of capital growth. However,
when you add together the income return plus the capital
growth on a commercial investment, over recent years,
average total returns have been topping 20%.
-
Commercial leases are contractual as opposed to the
statutory regulated ones for residential. This means
that generally the landlord/investor has more protection
if the tenant fails to pay rent or meet his contract
commitments.
-
The
Full Reaping and Insuring (FRI) lease agreement is
accepted as the norm for commercial tenancies in the UK.
This means that the landlord can expect a clear return
on his investment, free from ANY additional costs.
-
Leases are agreed for much longer periods than the
common 6 month tenancy agreement on a flat or house. 5,
ten or even 15 years would not be unusual with a
commercial tenancy, so generally there's a lot less
management involvement needed from the landlord or his
agent.
-
In
addition to a longer lease, it's accepted practice to
review the rent every 3 to 5 years. This means that the
income return on the property is kept in-line with price
inflation and the whole investment acts like a pension.
-
Its
more common with commercial to buy properties already
tenanted.
If you get it right with commercial property
your investment can produce a guaranteed
long-term income stream - far higher than
alternative investment types - with steady
capital growth as well. Because commercial
tenants sign long leases there's far less
chopping and changing than with residential
lets, where tenants come and go every 6 or
12 months.
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Information here is general only & believed to be correct, though we cannot guarantee
it, nor do we accept any liability if you act or fail to act on this information. Always seek professional advice before
making decisions. Investments can go down in value as well
as up over time.
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