Increases in stamp duty, changes to mortgage tax relief, and stricter regulations have all lead to a significant slowdown in the residential buy-to-let market. With Brexit looming and the financial turmoil it may bring, should those with money to invest turn their attention to the commercial market instead?
Here are seven reasons to invest in commercial property:
- Property is widely considered to be a sound investment, given the historic increases in property values over time. This applies just as much to commercial property as it does to residential, in spite of the higher profile residential property attracts in the media. You are therefore likely to make a good return on your initial investment in a commercial building, and will benefit from the rental income it brings in at the same time.
- By diversifying your investment into commercial property, you can spread the financial risk and minimise any losses should one or other of your assets suffer a downturn. And it may be possible to spread the risk even further by the very design of a commercial building – some properties may be divided and let to two or more tenants, minimising losses should a part of the building become vacant at any time.
- With the right commercial tenant in place, an investor can enjoy a long-term, steady rental income, which can often last for many years, even decades. This compares very favourably against the potential volatility of other assets such as stocks and shares. Conversely, investing in residential property can have drawbacks in terms of a high turnover of short-term tenants, as well as high maintenance costs.
- With the business to business relationship which exists between a commercial property owner and their tenant, dealings will normally be on a more professional basis than with a residential tenant, where disagreements can easily escalate and lead to a breakdown in communications.
- If you do find yourself in a position where your tenant stops paying rent, with a commercial property you can peaceably re-enter, change the locks and take back possession without even having to serve a section 146 notice on the tenant. In contrast, with residential premises, the procedure for recovering possession has to go through the courts which can be costly and take several months, all while mortgage payments on the property need to be maintained.
- Usually, a commercial tenant will only occupy the premises during business hours, leading to less wear and tear on the property. When repairs do become necessary, commercial leases usually specify that maintenance issues are the responsibility of the tenant. This is also the case with other on-going costs such as insurance and rates.
- As the owner of the commercial property you will be able to make alterations as you see fit – for example combining or dividing the space to maximise your income or to make the property more attractive to future tenants. In addition, it is generally easier to obtain planning permission for change of use for a commercial property than a residential one.
As independent local solicitors, Bretherton Law have been serving people and businesses in Hertfordshire for over 50 years. Whether you are buying, selling or leasing business premises, about to commit to a new lease, or in the middle of a rent review our experienced Commercial Property team will give you honest, professional advice and ensure your affairs are handled swiftly and smoothly. Please contact Osman Dervish, a Commercial Property Solicitor, on 01727 869293 or use the contact form below.