Investment by private investors into non-residential property is now becoming an increasing trend. “There are many advantages of buying a commercial investment”, says Marcus Andrews FRICS of Goadsby, who advises investors in these matters.
The Bank of England’s Chief Economist Andy Haldane says that property is a better option for funding retirement than a pension.
Commercial property is a wide-ranging sector incorporating shops and factories. It is an alternative to residential buy-to-let. The tenant is normally responsible for repairs and insurance at a commercial property and not the landlord, which is a major bonus.
Another bonus is commercial leases usually run for 5 years, and sometimes 10 years or more, compared with just 6 to 12 months for residential leases. “You thus don’t have the problem of finding new tenants every year, to cover your loan payments” says Marcus Andrews.
Also as you are leasing your property to businesses with a far higher income, it is likely they will be more reliable. Once you have leased the property, there is little more work than collecting rent and organising the insurance – which you get back from the tenant.
Most residential investments have a relatively low entry level, but decent commercial premises let to a multiple trader can easily cost £0.5M or more. There are small lots sold under the Stamp Duty threshold. Those let to established tenants in secondary shopping locations say, achieve good prices – say 7.5% gross return before tax.
Due to record low levels of Base Rate, there is clearly a much higher return from investing in Bricks & Mortar and not leaving monies in a Bank Account.