When you think of property investment, you might think of owning multiple homes that you can rent out and gain a steady stream of income from. That’s probably the most common, and easiest, form of property investment to be sure, but it’s not the only option. You can also think about commercial property investment, which is different in a few key ways.
It’s important to point out that any property investment is not without risk, but with careful planning and research, you can mitigate a lot of the potential pitfalls people fall into. Having a goal in mind can help you identify the best opportunities, too, but don’t discount the expertise that local property agents can provide, just like our team at Williams Sillitoe.
For now, we’re going to look at commercial property investment, what you need to know and the steps you can take to make it work for you.
What Is Commercial Property Investment?
Commercial property investment is when you buy a property, or part of one, that is used for business purposes, such as an office, shop, restaurant, warehouse or a building with another purpose. These buildings are generally a lot more expensive than residential properties, and are always in demand as businesses are present across the country.
This makes them a great opportunity for people looking to generate steady income, whether it’s from a single property or shares in multiple buildings. Choosing the right properties, in the right locations and where demand is high, is a great way to make this type of property investment work for you.
How To Invest In Property
There are different ways to invest in property, and commercial property is even less straightforward.
The most common way is similar to residential property investment in that you buy a property and lease it out to businesses for a set amount of time. This means you are responsible for the condition and usability of the building. However, you can also buy a share of a building to lower your responsibilities, but this will reduce the amount of revenue gained from its use.
Another way to invest in commercial property is through property funds. This can be a direct fund through an organisation or trust, which owns a building, or through investment schemes where you have shares in companies that own properties.
What Do You Need To Know Before Investing In Property?
Before investing in property, especially commercial property, you should know that this isn’t a silver bullet to making money – and you need to be in the right position to make this work. With the increased costs of these buildings, you also need to understand your obligations in regards to Health and Safety, building maintenance, structural codes, and more.
This also includes what the business will do once in the building. For some industries, specialised equipment is needed and this might not be suitable for the property. Understanding what the property can, should, and will be used for can be a big part in finding the right organisations to set up shop in the building.
How Does Commercial Property Investment Differ From Residential?
Commercial property is often more expensive than residential property, due to the nature of its intended use, size and location. While some buildings are intended to hold one occupant, their size and location will reflect this. Compare this to office blocks, shopping centres, and industrial complexes, however, and you will see bigger properties that can hold more than one business.
The responsibilities of owning a building like this are more complex, and there are different rules governing them that need to be taken into account. However, with the right property, and sufficient funds to purchase and maintain it, commercial property investment can be a fantastic option.
Buying An Investment Property
When it comes to buying a commercial property to invest in, you have to take into account a range of factors – much like you would when choosing a residential property. The same kind of questions you’d ask for a home to live in or to house your business are still relevant here, but you’re not asking for yourself – you’re thinking of the people who will use the property instead.
Knowing who will be able to use the property, and whether their business will benefit from the size, location and rental price are all factors to consider when choosing where and to to invest in. If you can understand what business owners need and want, buying an investment property becomes a lot easier to navigate.
What Makes A Commercial Property A Good Investment?
On top of housing businesses that find success and what to say, and being in a highly sought after area, one of the most important factors in determining whether a commercial property will be a good investment is how profitable it will be for you.
In a residential property, you compare how much the property costs with how much you can earn from it. This will show how profitable it is, whether you buy it outright and can earn straight away or you need to pay off a mortgage first. With the latter, you’ll be able to find out how long it will take to pay off first.
With a commercial property, the equation is different. The cost of the building is higher, but in some cases you can get multiple payments. The length of time a business is in place can also affect this formula, as do any costs to maintain the building.
This is a simplified explanation, but our experts can provide more details.
What Warning Signs Should You Look Out For?
When investing in a commercial property, you should watch out for similar things to residential properties. Location and ease of access for customers is a big consideration – if a business is not successful, it will cause financial stress for them and you.
The condition of a property matters, too, as you have to make sure it can handle what’s required of it while also passing all structural and Health and Safety checks. If you choose a building that needs work, ensure you have the funds and resources to deal with this.
Also, make sure that if you choose to buy shares in a property, or opt to invest in the shares of property companies, you’re aware of how the market can change, what return you’ll get on your investment and any other clauses or responsibilities you will have.
Property Investment In Manchester
Manchester is a hub of the North West, with many businesses choosing to base themselves in the area thanks to excellent access routes and cheaper prices than other locations, such as London.
That’s seen a real increase in the number of commercial properties being built to accommodate this increase in demand. Even outside of the city, there are a lot of opportunities, and this means you can find commercial investment property for sale in a number of locations, not just in popular developments in areas like Salford Quays, Manchester Airport or out towards the Trafford Centre.
Want To Find Out More About Commercial Property Investment?
It can be a daunting area to get into, but commercial property investment is a great way to diversify your portfolio and generate a steady stream of income. While there are different ways to go about it, you need to find the method most suitable for your situation. Take your time, do some research and speak to experts to put yourself in the best position to make this work.
If you’d like to learn more about commercial property, what it takes to get involved with it, and how to make the most out of any opportunity, our expert team at Williams Sillitoe are here to help. We use our local knowledge of South Manchester and Cheshire to keep on top of every interesting development that comes up. If you want to know more about your opportunities, contact our team now.