22 October 2012
Commercial property investment: worth considering?
Traditionally, we have always invested in residential property. Its a market we know and understand and we're comfortable with the risks. However, a few months ago, we bought our first commercial property. Its a shop unit on the ground floor with a former restaurant on the upper floors. Its just under 6,000 sq ft of space and is located in a major town centre in the South East. We bought it at auction for an attractive price. It needed a bit of refurbishment so we repainted the front elevation and made sure the roof was water tight. The shop unit was empty when we bought it but we managed to let it to a new tenant within a couple of months on a 10 year FRI lease. We were pleasantly surprised with the gross yield on our investment and we've only let half of the building so far. So,it has made us rethink our strategy a bit and since this purchase, we have been looking at other commercial properties. There are plenty available at auction or by private treaty right now. We've registered for commercial property alerts on RightMove and there are quite a lot coming through at the moment. They range from plots of development land with planning permission throught to pasture land, shops, offices, warehouses, theatres and even an old school. The thing with commercial property is that they provide a lot of scope for adding value and there are lots of possibilities for change of use and residential conversions. They are also safe investments if you want to buy a bank or shop with a good quality tenant and a reasonably certain future income stream. If you have money sitting in a pension fund and you transfer it into a SIPP, you can buy a commercial property yourself and receive the rental income directly into your pension fund. There is no tax to pay on the income and no capital gains tax when you sell it! Worth considering?