Diversify your
Investment Portfolio with Commercial Property:
Investment in a commercial
property can provide secure log-term income streams
and steady capital growth: it can help you diversify
your investment portfolio from residential property,
shares and bonds. Like all investments though,
commercial property is not without its risks:
- Commercial properties
generally need a bigger initial investment than
residential properties, though you can invest
collectively into a syndicate.
- The property will
need to be managed
- Each property is
unique and cannot be moved, so its location is
vital and so is its local economy.
Tenant demand is the key.
- Unlike shares, where
you can pick up a telephone and "sell", commercial
properties can take months or even years to dispose
of.
Given these downsides,
there are also some substantial advantages to
being the landlord of a commercial property:
- Commercial properties
typically let for long-terms - 10, 15 and even
25 years is not uncommon, though generally the lease
lengths have come down in recent years, reflecting the
uncertainties of operating businesses in the 21st
Century.
- Tenants generally
accept the custom and practice of insuring and
repairing leases in the UK - the tenant pays ALL
outgoings which gives the investor landlord a clear
return.
- Whereas residential
property has recently given high capital growth
(particularly over the last 10 years) commercial
properties provide low but steady growth, but a
high income return.
- This latter point
particularly suits the individual who needs income
now - compare the low building society return of
perhaps 3.5% with a return of between 8% and 20% from
a good solid commercial property investment.
- There are some tax
advantages which involve incorporating a
commercial property into a pension plan - a SIPP,
though this is not for everyone.
For more information on
commercial property investment download this
PowerPoint™
presentation
given at the Property Investor Show, London 2003 by
LandlordZONE™
editor Tom Entwistle
New opportunities - but
exercise caution:
New financial products
coming along in 2004 onwards could open up the
commercial property investment market to the smaller
investor - perhaps those who have developed a taste
for property investment through the successes they have
experienced with buy-to-let - a market some feel is
running out of steam.
New investment vehicles
could mean that instead of needing millions of pounds
for "prime property" investments, the smaller investor
will be able to participate
with thousands, by buying a share in an individual
property, or a managed portfolio.
However, as Gramham Chase,
RICS commercial property spokesman warns: ‘People may
feel comfortable with property as an asset class through
experience with the residential sector but the
commercial market has its own dynamics and, while
offering great opportunities, it also holds particular
risks. At the moment we know that many financial
advisers are not qualified to give advice in this area.’
Those considering a
move into commercial property, either directly by
buying a property, or indirectly through investment
vehicles, need to do their homework - that means doing
the reading and research.
Investors should also be
careful about paying way over-the-odds for advice
which is readily available for free or at a much reduced
cost.
For example, as a recent
Which? report has highlighted, individuals are
paying thousands to attend "get rich quick" property
millionaire seminars costing up to £6,000 when in
reality they could get the same information and advice
by buying a package of selective books costing no more
than £60. A
subscription to a reputable publication such as
Property Investor News, who also run regular
property investment seminars costing hundreds, not
thousands, is an excellent way to get started.
So too is joining an
organisation like the
Property Investors Club who are now starting to run
reasonably priced
Commercial Property Investment Training Courses
|
See the
PowerPoint™
Slide Show
of this Seminar
