Getting started

[JDO]

My wife and myself own several residential investment properties.

We would like to expand our business into commercial property but are unsure were we should start.

Can anyone recommend good websites or reference books that would point us in the right direction.

Thanks in advance

John

[Matt Churchill]

May be worth talking to some local commercial agents, that way if you talk to enough of them you might get to the truth;)

A lot will depend on what sort of money you want to spend and whether you want local or not. As with residential property it is a large topic to start considering. IMHO you want units which will always be in demand, so steer clear of properties which have very defined, bespoke uses. Such as car showrooms for example. Whereas generally speaking small shops/units are in always in demand.

Locally to me, there are loads of new industrial unit builds going up for the £200k-ish amount. Generally, 80% or so storage and 20% office. So, if building is still taking place there must be demand I guess.

One thing to be aware of is the difference in the way lenders view commercial investment to residential investment. For example a lot of lenders will steer clear of unlet properties, whereas in the residential market this is not so much of an issue. With commercial you will want a good long lease to be in place, as a lot of lenders will not like lending on a term longer than the lease in place.

The basic reason is that the value of a commercial property is much more linked to the lease, for example if you look at buying a commercial property with a 10yr £20k pa lease, then it has a value of £200k (very simplisticly), so the lender will always be able to find a buyer when there is guaranteed income in place, but what they will not want to do is give you a 15yr loan, as where does the repayment come from in years 11-15? The commercial market is not as straightforward as the residential, so lenders perceive that the chance of selling a vacant un-let residential property is far greater than the same commercial property.

I hope that this helps a little, and please realise that this is a very broad/general answer.

[JDO]

Thanks Matt, your comments are indeed helpful.

Cheers

John

[SteveP]

We would like to expand our business into commercial property but are unsure were we should start.

If you look at www.rics.org and search for commercial property you will find lots of useful articles, some you can view others are for RICS members only.

here is an example http://www.rics.org/NR/rdonlyres/D060D5D0-237D-406B-9FA8-8F83C69981CA/0/cms_2006q2.pdf

If you don't want to invest directly in property you could look at REITs (Real Estate Investment Trusts). More on that here http://www.rics.org/Property/Propertyfinanceandinvestment/RealEstateInvestmentTrusts/Hot_topic_REITS_200607.htm

The advice about talking to commercial agents is spot on too. Bear in mind that you can pay a commercial agent to find you a suitable investment property, but if you speak to agents who are being paid to sell....well they are being paid to sell.

Always get a survey done by a chartered building surveyor before you buy, this is even more essential than when buying a home. For some premises it is advisable to have specialists report, for example a chartered building services engineer can report on things like the electrical systems, lifts, etc.

Be aware that commercial landlord and tenant law is very different to residential. Those who bite the bullet and pay for good professional advice early on invariably fare better than those who do not.

[stender]

Daltons weekly has a lot of commercial sites for sale and so does rightmove, but not many.

[yeahbutno]

Those who bite the bullet and pay for good professional advice early on invariably fare better than those who do not.

Couldn't agree more.