Five Important Advantages Of Investing In Commercial Property

The recent recession and credit crunch has had a strong adverse affect on commercial property. With increasing numbers of vacant premises and decreasing property values, investing in this sector has been tough over recent years. However, figures from the Investment Management Association in late 2010 showed that the commercial property recovery may have begun. Values and interest are rising as investors return to this sector.

Even though the market in the last few years has been beset by problems, there are still some very good reasons to owning and investing in commercial property. As the sector becomes viable once again let us examine the top five reasons for becoming involved in commercial property.

Tenants look after the properties: Residential tenants are often guilty of not taking good care of a property. Landlords often have to spend money on redecoration or cleaning between tenancies. However, as businesses want to make a good impression, they often take excellent care of their commercial property. Having poorly maintained premises can have a very negative effect on a company.

In many cases (and obviously dependant on the letting agreement) commercial tenants are required by their letting agreement to fully maintain and repair the property they are letting. This differs to renting a house out, where you as the landlord are required to deal with the wear and tear issues, maintenance and other items such as the gas and electrical equipment inspections. Accountability for such items will normally fall on the business in a commercial let.

Commercial property leases are longer: Commercial property leases tend to be between 3 and 20 years. It is not unusual for a tenant to sign a least of five to ten years. This gives you the security of a long term tenancy and the business gets the security of establishing a firm base. Compare this to residential tenancies which typically run for between 6 and 12 months, leading to much greater uncertainty.

Tenants have to give longer notice: Another advantage to landlords when it comes to security is the fact that commercial contracts normally stipulated that the tenant has to give six months notice before they end their lease. This gives the landlord a lot of time to find new tenants and avoid the dilemma faced by many residential letters who have can see their finances hit by properties standing empty for long periods. In the current unstable economic climate, finding tenants that offer medium to long term stability is a very wise move.

Rents are higher and more certain: Commercial landlords often find that it is not just easier to let commercial properties, but also more profitable. Rents for commercial properties are higher than residential rents, generating a higher income month in month out. Commercial leases tend, as an industry rule, to be reviewed every 12 months, which normally involves a year on year rent increase.

You can buy using a commercial mortgage: Since the property bubble of the past decade burst and the get rich quick dream of buy to let residential properties vanished, it has become much harder to get a buy to let mortgage. Many mortgage lenders have decided that the buy to let market is more trouble than it is worth and have abandoned it completely. Those that still offer buy to let mortgages are demanding far higher deposits.

Commercial Let Rental Income Is Higher Than Residential: Commercial properties often attract higher rental income than residential property, making them more favourable to investors. Income is still usually monthly as with residential which is also attractive. You are also entitled to review the rent annually so that you can increase rent in line with current market conditions.

All the indicators point towards the fact that slowly but surely the economy is recovering. As it does, businesses will look for new premises and banks will gradually become more willing to lend. These are the ideal market conditions in which to make a profit from commercial property and take advantage of the coming opportunities.