Property and Business

 

With everything that has been going on in the residential buy-to-let market in recent years, it’s not surprising to see that some investors have taken a whole new interest in commercial property. If you’re new to property investing, there here are some tips to get you started.

 

Do Your Homework On The Sector

The principles of investment tend to apply across most sectors, but each industry area tends to have its own characteristics which you will need to understand in order to be successful. Much of what you may have learned in residential property will also apply directly to commercial property. However, there are some differences which you will need to grasp.

 

A good approach to take is to do some general reading and research, focusing on understanding the necessary jargon. Then, look at networking with other industry experts to further test your understanding and develop it even further.

 

Choose A Preferred Commercial Property Niche

Much like its residential counterpart, the market for commercial property contains a large number of different specialist niches, with each one carrying its own set of distinct traits. When you are starting out in commercial property, you might find that it is best to choose a niche which has a lot in common with the residential market, such as hotels, care homes or student halls.

 

This may make the learning curve easier for those who are new to commercial property but, as a side note, it may be best to stick to a niche to begin with so that you can fully understand it in depth and then diversify it later on if there is a need to.

 

Get To Grips With Financial Statements

If you decide to buy a property and directly let it to tenants, then you will need to understand corporate financial statements in order to be able to properly judge a prospective tenant’s financial health. If you do choose to buy a property as an investor in a company or niche which depends on the use of other management companies, then you will need to fully understand corporate financial statements in order to be able to judge the health of prospective investment partners. In short, if you want to invest in commercial property, then it is highly unlikely that you are going to find a way around getting to grips with these financial statements.

 

Learn How The Numbers Work For Your Niche

When you purchase residential property, you tend to buy a whole property, have ownership of its management (even if you do choose to delegate with an agent) and decide for yourself which rates you want to charge tenants.

When you purchase commercial property, perhaps with a loan or commercial bridge loan, it is more likely that you will buy a unit as a whole and the investors are then mandated to use a specific management company. This will then guarantee them with an income for a fixed-period and have a process in place in which investors are able to exit the scheme after a certain period by selling back their units to the vendor for an agreed price.