Top 5 things to check when investing in commercial property
Investing in commercial property can be an attractive proposal. From the point of view of returns on investment a commercial property can be a good choice. Rental yields for a commercial property are generally higher than a residential property and commercial lease periods are now returning to longer periods, providing a level of comfort for landlords. As the commercial sectors grow the requirement for office space will only increase.
Before investing in commercial property, we suggest considering the following points:
1. Location
Location, location, location. This can not be underestimated and is so important. It is a major factor for any tenant when they are seeking a tenancy. A tenant will be seeking good access, foot fall and flexibility of the property. Property in prime locations will continue to be key investments, and property in poorer, secondary locations are often more difficult to let and have less facilities. Check if the area has restaurants, shopping facilities and good rail links and infrastructure nearby.
2. The Market
The economy and market trends at the moment you are planning to invest will need to be understood and assessed; this will allow you to understand the best time to invest. Check the demand for property (office, storage and shop) and any upcoming improvements to the area you are looking at. You must do your research and not be afraid to ask questions about a prospective property and the surrounding area.
3. Maintenance
The main disadvantage of owning a commercial property can be maintenance and upkeep. The value of your property is affected by the state of it’s interior and you will have to consider arranging for minor or major repairs before you can lease the property to a tenant and earn a return. A common practice is, once a property is let, to let the tenant maintain and repair the property and have the landlord checking the property. This will require you to make an estimate of the costs to be incurred annually against the property. However, this can become an area of dispute in certain circumstances and it is often recommended that one seeks advice.
4. Professional Support
Do you have a team of professionals who can help manage the work involved when investing in commercial property? Typically your team should include a solicitor, accountant, surveyor and a financial broker. Also, speak with local commercial agents and form a view of the area, the rental return and demand for property.
5. Financial planning
How are you funding your investment? Small properties are usually paid for outright, but larger properties typically require investors or a loan from a bank.
This article is written as a general guide and is not a substitute for professional advice. You are strongly recommended to obtain specific professional advice before you take any action. If you would like any more information in relation to this article then please feel free to contact me via email: tony.chauhan@bowlinglaw.co.uk.
