The UK’s commercial property market can be a potential minefield for the novice investor. During the last recession many investors were left with empty properties on their hands as a result of bankruptcies and property values declined sharply.
On The Up
In many parts of the UK the value of commercial properties is currently rising. The savvy investor needs to find an area that’s earmarked for regeneration or carry out their commercial investment activities through a fund that either owns properties or a fund that is part of a larger portfolio of developers, estate agents or property builders.
If investing directly in commercial property the premises should be secured, once bought, by Security Direct products including grilles or roller doors. In this way your investment will be protected from vandals or squatters.
Anyone who is thinking of investing in any type of property should always be aware that property values can increase but they also have a nasty habit of going down should market conditions change. Unless you want to use the property yourself finding tenants can be a problem, which means that you won’t always get a return on your investment.
Just take a look at the number of empty shops on a UK high street and you’ll soon see that the property market can be extremely volatile. Planning permission can also be a problem in some areas. Before you buy a property always do your homework and check with the local authority that planning permission for redevelopment won’t be an issue.
An article in The Daily Telegraph suggests that the commercial property market is booming, commanding ‘gains of 19%’ and this market is expected to command impressive yields of up to 15% in the current financial year. If you have recently cashed in your pension pot you could look at the commercial property market as a way of increasing your pension.
Rather than buying a commercial property yourself, take a look at investment trusts. Unlike the problems faced by owners of commercial property should the market face a downturn, fund managers don’t have to ‘sell assets if investors want their money back… it’s easy to sell shares harder to sell an office block.’
If you are thinking of dipping your toe into the commercial property investment pool then you should always take advice. Learn how to understand the investment pages of the Financial Times. Alternatively talk to a specialist advisor. There are significant tax gains to be made by this sort of investment and the website Tax Cafe suggests that you can qualify for ‘business asset taper relief,’ which acts as a capital gains tax shelter. Alternatively, if you invest through a Self Invested Personal Pension (SIPP) you won’t have to pay ‘income tax or capital gains tax on your rental income and capital gains.’
Commercial property investment sounds tempting and private investors can benefit from this type of investment. Whether you are thinking of investing directly or through a fund and use ‘commercial property investment as part of a wider investment strategy,’ study the market. If you feel that you can’t afford to lose money or are concerned about a fluctuating economy, diversifying your investments could be your safest option.