From Starting a Business to Franchising an Existing One: A Guide To Commercial Property Investment
Investing in property is a rite of passage for many Brits today. Whether you’re taking your first steps onto the property ladder or are a past-master at navigating the market, owning property can be a great asset to the deed holder. However, whilst investing in property can be a great way to accrue value, many of us focus solely upon the residential, missing out on the potentially lucrative world of commercial property.
Whilst most investors in commercial property are businesses looking to expand their operation, this doesn’t mean that individuals can’t make a significant amount of money on such an investment. However, whilst putting your money into a commercial premises can pay dividends, it presents the investor with unique challenges and opportunities that you may not be aware of.
These issues can trip up even the most seasoned property investor if they are not fully prepared, which is why we’ve decided to create this handy guide to help you make your commercial property investment a success.
Commercial vs. residential: what are the pros and cons?
Whilst both can offer their investors potentially positive returns on investment, commercial and residential properties offer differing advantages and disadvantages which need to be understood before going ahead with an investment. With memories of the crash of 2008 still firmly in the collective mind of the British people, it is imperative to take time considering which investment strategy is best for you.
Investment-wise, residential properties are usually the cheaper option of the two. With less capital required, investing in a residential property is a less risky endeavour, making it one of the most popular avenues of entering the world of property investment.
Residential properties can have value added to them relatively easily over time. Extensions and renovations all add to the value of a property and, if you decide to buy-to-let, this will allow you to up your monthly asking price.
The biggest downside of a residential property is its vulnerability to the market.Shorter leases, coupled with an uncertain Brexit outcome makes the residential market somewhat volatile, especially due to time investment and a shortage of revenue whilst the property is unoccupied.
For these reasons, although investing in a residential property can be the easier option, the return on investment is most likely going to be lower than investing in a commercial property.
On the other side, commercial properties require substantially more capital and are thus a more high-risk investment. However, a commercial property will accrue a more positive return on investment in the long run. With lengthier leases on a more professional basis compared to a residential contract, commercial properties are much more robust when it comes to changes in the market.
Another benefit of taking the this route is that commercial properties are usually VAT exempt, which could be a great way to save money. However, as we’ve mentioned, with higher investments comes higher risks which can put some first-time buyers off, however, with the help of a conveyancing specialist, these risks are significantly reduced.
Types of commercial property
To make things a little bit easier, commercial properties have been grouped into five different categories. These five categories are as follows:
●Offices
●Retail
●Industrial
●Leisure
●Healthcare
These categories cover the spectrum of commercial properties here in the UK as determined by the Town and Country Planning (Uses Classes) Order of 1987. This piece of legislation defines how a commercial property should be used, with each being specifically defined by the local authority. Splitting into more specific subcategories known as ‘use classes’, these categories must be strictly adhered to by the owner, or they may risk costly fines. There are also various opportunities that present themselves depending on the commercial property class you decide to invest in.
For example, with a devaluing pound, many tourists are finding the UK to be a tempting holiday destination. Because of this, leisure properties are seeing extremely robust returns and are showing no signs of slowing down.
Pitfalls when investing in commercial property conveyancing
As with any investment, joining the commercial property market does come with a variety of pitfalls that can cause costly and time-consuming issues if not dealt with properly.
One of the main things you should consider before investing in any commercial property is its location. A property located in an area with low footfall or that is difficult to reach will be much less desirable to prospective tenants or customers, so consider this before making any rushed decisions.
Another thing to think about is the litany of additional costs that come with investing in a commercial property. Buying is one thing, but making it work for you is a completely different ball-game. This is where a comprehensive check-list can really give you a picture of your potential investment and its long-term viability.
Finally, if you’re renting your commercial space out, it’s essential that you have a full understanding of your tenants and their business. Carrying out an in-depth screening process is a minimum standard when it comes to renting out a commercial property.
Enlisting the help of commercial property solicitors
When it comes to investing in property, be it commercial or residential, it’s always best to enlist the help of the professionals, as they can significantly minimise any risks during the investment process. To begin with, a conveyancer will carry out extensive checks and searches. After you have given them your specified set of parameters that your require, they can competently search for the right property and assess any potential risk factors that could arise.
However, probably the most useful aspect of hiring a professional is that they can help you navigate the notoriously tricky world of commercial property law. With a range of legal issues, ranging from conditions and provisions regarding the title of the property to restrictions on certain planning permissions, it’s important to have all of the information regarding the law laid out to you. With this in mind, a conveyancer can bring all of the facts to you and guide you through the process with ease.
Andrew Lee Property Lawyers: South East England’s premier property conveyancing specialists
Whilst investing in a commercial property can be a great way to expand your business or create a lucrative passive income, having a professional to advise you can ensure you maximise your investment potential. If you’re in the Kent area and looking for a solicitor you can trust, get in touch with Andrew Lee Property Lawyers today.
With our expert help, we can turn the infamously complex legal gauntlet of property ownership into a smooth and stress-free process. With over 20 years of experience in the industry, Andrew Lee & Co has cemented itself as a name you can trust.
Our team of commercial property solicitors have worked with countless investors and are more than qualified to ensure you get the best deal you possibly can. Whether it’s checking over the fine-print or protecting you from legal disputes, we can help large-scale businesses and small start-ups alike grow their operation.
If you would like to learn more about how Andrew Lee & Co can help you maximise returns on your commercial property or have any questions about our range of conveyancing services, visit our website or have a chat with one of our advisors by calling 01622 750 101.
