Is it time to invest in commercial property?
Residential buy-to-let investments have become less attractive in recent years, with increasing property prices and reduced average rental yields. Tax rules have also become less favourable for those who own property in their own name rather than through a limited company, which may explain a shift towards investing in commercial property instead.
As experts in commercial mortgages and funding, we explore the benefits of commercial property investment and what to look for in a potential investment.
An introduction to commercial property investment
Commercial property investment, where a property is purchased and then let out in return for a rental income, yields higher returns than residential buy-to-let investments. With commercial property, rent may be paid monthly, quarterly, or to almost any other timeframe that suits both parties.
Rather than the standard AST (Assured Shorthold Tenancy) agreement used with residential investment, commercial property lease agreements are usually bespoke and agreed over longer terms (lease lengths between 3-20 years are common).
Benefits of commercial property investment
Commercial property investment offers higher returns than residential buy-to-let property. Also, with commercial property, the terms of most leases mean that the tenant is fully liable for the repairs and insurance of the property. This removes a lot of the cost and effort of maintaining the property.
Residential tenancy agreements require repairs and maintenance to be handled by the landlord at their own expense, which is one reason why commercial property is sometimes favoured over residential buy-to-let investments.
What to look for in a commercial property investment
Taking a really close look at the market is the key to making an informed choice when it comes to your investment.
For example, during the pandemic, essential shops were allowed to stay open while other businesses were ordered to close. As a result, retailers such as convenience stores enjoyed an increase in sales and came to be viewed as ‘pandemic proof’. No one knows what the future holds, but the pandemic has given us an insight into which businesses fare well in times of crisis.
There are, of course, all sorts of other factors that must be considered before investing in any type of property. As experienced commercial funding specialists, we are more than happy to offer advice on your prospective investment.
FC Funding is one of the leading commercial brokers and commercial mortgage lenders. If you’re considering investing in commercial property this year, we can help. With years of experience and a vast network of industry contracts, we are perfectly positioned to get you the best deal possible. To find out more, please don’t hesitate to get in touch with us today on 01202 937880 and we’ll be more than happy to discuss your case.