It makes good business sense to diversify your portfolio and limit risk when investing in property. Commercial property, although generally costlier than residential properties, can often bring an investor a greater and more secure yield.
However, an understanding of the market is vital as there will be certain legal considerations when going ahead with this investment. This post will give you a brief insight into some of the challenges and the decisions you may have to make when adding a commercial property to your portfolio.
Securing a commercial mortgage
To purchase a commercial property, you may need to apply for a commercial investment mortgage. Typically lasting between 3 to 25 years, they’re designed specifically for individuals who want to purchase commercial property to rent out, therefore benefitting from the rental income and property value appreciation.
There are a number of different types of property to invest in across a variety of sectors, including business, leisure, retail, industry, health and education. However, you should be aware that, according to MoneySavingExpert, some lenders have a minimum of £75,000 or more due to the legal and administrative costs associated with commercial properties.
Legal considerations
Of course, an investment of this amount should not be taken lightly and the following considerations may be vital in succeeding in buying and profiting from your commercial property investment:
Finding the right property
Unlike residential properties, there aren’t many high street agents for commercial properties. Many are sold through private treaty or by auctions, so it may be worth instructing a good commercial agent with investment expertise to help you get on the ladder.
Freehold or leasehold?
If you choose to buy freehold, you’ll own all of the property, including the land. With a leasehold, the owner contractually holds the interest for a certain period, which is limited to the length of the lease.
So, although you will probably spend more buying freehold, you are more likely to achieve a greater return in the long run.
Additional costs
Other costs you will have to consider alongside the initial purchase price include:
- Stamp duty and land registry fees
- Surveyor, estate agent and solicitor fees
- Possibly VAT
- Building survey
- Environmental report
For more information on these, consider seeking legal advice from experts like DWF, who can use their experience to advise you how much these costs may set you back.
Buying a commercial property could be a lucrative investment decision. However, don’t forget about all the above considerations that come with it and consider seeking legal advice when investing in commercial property. By consulting the experts, you’ll have access to in-depth knowledge to identify opportunities and risks and help you achieve your financial objectives.
