Although the immediate future for the commercial property sector is rather uncertain (with current high inflation and interest rates), in the long term, the sector still remains a better bet than investing in residential property. Here Maunder Taylor, who specialise in commercial property investment in North London, explain why.

There’s More Financial Security

With commercial tenants, you’re not as vulnerable as with residential tenants, who may lose their job or see a change in their circumstances which means they have difficulty paying their rent. This is because established businesses tend to have more financial security and stability than individuals.

Commercial rents are generally payable quarterly in advance in the UK (although leases may vary) so you have a more reliable cashflow. And recent changes in tax laws have affected residential buy-to-let landlords more than the commercial sector. For instance, since April 2020, you’re no longer able to deduct any of your mortgage expenses from your rental income to reduce your tax bill. Instead, you now receive a tax-credit, based on 20% of your mortgage interest payments. This is less generous than the old system for higher-rate taxpayers, who effectively received 40% tax relief on mortgage payments.

There’s A Higher Rate of Return

Return on your investment will be greater because of the increased earning potential. This is because some commercial premises can house more than one business, or type of business.

At Maunder Taylor, we generally estimate getting a 7-8% yield on any commercial property investments we recommend to you, and this is net, on top of any purchase or management costs.

You’re Not as Responsible for Repairs

Commercial tenants usually pay for any damage and ongoing maintenance rather than the landlord. They usually organise all of this themselves and it is paid through their service charge. In the case of residential tenants, the landlord has to arrange and pay for all of the maintenance of the structure of the building and any communal areas.

Problems Arise in Normal Working Hours

Commercial tenants normally contact their landlords during the hours in which they are working in the premises (that is, normal business hours). For residential landlords the opposite is usually true, as tenants tend to be home in the evening and at weekends, meaning landlords may have to be on call 24/7.

More Security of Tenancy

Commercial tenants generally go through a more extensive series of background checks. If they don’t meet their financial obligations, it reflects badly on their business, which could in turn affect their cashflow. Similarly, they will want to keep the property in good condition as this shows their professionalism.

Commercial leases in the UK are generally longer than in the US and the EU, with the average office lease in the UK being for eight years, which again should help give you a regular and consistent income stream.

Commercial Property Investment in North London with Maunder Taylor

At Maunder Taylor, as well as recommending various commercial opportunities to would-be investors, we can also take on the management responsibilities too. So you don’t have to worry about staying up to date with the latest government legislation, or about taking care of any repair work.

We offer either direct investment, where our clients can invest directly into the sector, or shared investment, where the ownership is through shares in each property.

To learn more about our commercial property department, follow this link or call 020 8492 5526.

We also offer residential block management services if you are considering investing in that type of property in St Albans, Cheshunt, and across Hertfordshire and London. To find out more, click here.