Investment in property is one of the most popular things you can do in the UK for a number of reasons. A major one is the current housing crisis that’s driving everyone nuts. It has opened up several opportunities to get in and own a property.
People usually focus on residential property when venturing into real estate. This is forgivable because buying homes to let is arguably the most common form of property investment in the UK- meaning that many don’t spare commercial property a thought.
There are a few differences between commercial and residential property. A commercial property is primarily meant for business purposes. Examples include retail shops, offices, and industrial spaces such as warehouses and factory buildings.
Many are put off by the risks involved with commercial property including liquidity issues and unpredictability of the market. Unlike residential property, making commercial investment is a long-term commitment and does not have the promise of immediate returns that appeals to residential buy-to-let investors.
And while it does not look very pleasant at first glance, there are a few things that will interest you about commercial property investment.
One of the concerns about commercial property investment is the cost, and you may require a loan. You can use a mortgage affordability calculator to find out how much you can borrow.
Also, there are different options available for you to invest. You could buy and own the property or join a professionally managed fund. Alternatively, you can decide to buy shares of a listed properties company like in the stock market.
Crowdfunding is more appealing, in that, investment portfolio can be diversified to guard against future failures, and you can cushion the effects of any sudden fall in the market value of your property since any loss is shared among all the investors.
This is better than investing alone where you may have to bear all the loss and manage it alone. Buy-to-let residential investments will require you to get involved in the management of your apartments or hire an agent which will cost you some extra bucks.
Investment is primarily for making extra income. Residential investments are more liquid and yield almost instant returns but with recent tax crackdown on properties expected to get worse, there is need to look out for more viable and tax-efficient means of investing.
Investing in commercial property means you can reduce your tax liability and steer clear of the effects of the ever changing tax laws. By investing in a company rather than owning your own estate you can avoid exorbitant tax rates which could be as high as 45% and only have to pay the corporation tax rate of 20% on rental profits below per £300,000 a year.
While residential tenants usually stay for five to ten years, long-term commitment from commercial tenants means that your investment is secured for a long time and you won’t have to worry about having an empty property anytime soon.
Although the risks are there, investing in commercial property is an opportunity to give your income a reasonable boost if done the right way.