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Investing in Commercial Buy to Let Properties

Many UK property investors have always been taught that residential property and the buy to let market is where they should focus their money. Now, we are hearing a very different story as many investors are looking to diversify their investments and take another look at their property investment strategies. Some are even looking to the commercial property market, and for good reason.

     Why invest in commercial property? On average, the yields are generally higher. While a buy-to-let landlord might expect the value of their property to increase as well as taking the rental income, a commercial yield will be higher from rent, but price increases are less reliable.

     Another bonus to commercial property investments is that in a commercial property setting, the tenants will typically take on many of the costs that a landlord would have to deal with in the residential market. These can include the cost of insurance and repairs as well as business rates.

     Commercial tenants also sign up for longer leases, meaning a more reliable income. The downside to this is that void periods can also be longer which means the landlord must be more diligent in their property management techniques. 

     So, which property do you choose? Retail units and small offices are the most popular asset types for commercial buy-to-let converts. Restaurants, cafes and gyms make up a smaller percentage of available commercial properties while industrial lots come in a close third.

Is the Business Successful?

     Investors must also look at the quality of the business. If the business is in good shape financially and sees a lot of customer traffic, that could be a good sign that the tenant will sign a longer lease. When considering a commercial property, it is essential to find out the terms and length of that lease, rent paid and when the next rent review is due. This is especially important if the business is in good shape but you have doubts.

Mortgages and Lenders

     Commercial investors also need to understand that they have significantly less protection with commercial mortgages than with buy-to-let or residential mortgages. Lenders can call in the loans at any point and hike rates depending on market conditions. Mortgages also tend to be variable, with a margin over Bank Rate or Libor. If the rate is not fixed, you are vulnerable to market fluctuation.

Interested in finding out more about high-ROI yielding properties and what the different options are?
Well – why not come join us and learn first-hand.  Click here to register for our online training session on the ways in which we source high-ROI properties across the UK – and you might even learn a bit more about commercial buy to lets! 😉