There are so many different types of Commercial property investment strategies you can choose to compliment your own personal and business goals. Returns can be fantastic, both in terms of capital growth and income, but it is rare to be able to have all at once.
If you are starting out, or even some way down the path, spending time on reading and learning new Commercial property strategies is a must. You don’t know what you don’t know so it is best to get out of your comfort zone and expose yourself to new ideas and inspirations. True, investing in commercial is more complicated than residential investment, but there’s nothing you can’t learn. The trick is to learn as much as you can from other people’s mistakes, rather than your own. In terms of actually finding deals, I have always found it encouraging that the commercial property market is not very transparent which can mean great investment opportunities can often be disguised as bad ones.
Residential property investment and B2L is where we started but after a few years we wanted to build more scale so moved onto commercial investments. It was the 15 year anniversary of our first commercial deal last week. We found a small multilet (CMO) property and sold a couple of residential units to help raise the finance. There are lots of small single let deals out there and they can be a great place to start your commercial investment career.
Just before you grab the first commercial property deal you come across, spend some time getting up to speed. Here are 10 top tips on how to get ready and then started in commercial property investment. A good knowledge base will reduce the risk of taking on something you may later regret.
1. Invest time in finding out about lots of different commercial strategies.
There are so many different ways to invest in commercial property. Some invest via property funds and JV’s, but in the main I am talking about direct investment. This can be into offices, retail units, leisure, industrial, storage, workspace, hotels, nursing homes etc. You have to expand what you know in order to be able to work out what might match your desired outcomes. For instance it is no use investing in a major high street location with a 25 year lease already in place to a major blue chip if you want to grow your capital value and generate a higher level of ROI. Chances are the yield will be as low as 3-4%.
2. Meet people online & offline who are investing in commercial property.
Investing in property does not need to be solitary, it is a team sport. Surround yourself with people who are already successful in the area of expertise you want to really get good at.
3. Contact local independent commercial agents
As you know there are residential sales agents and sometimes they have a different department dealing with local commercial deals. Ask your contacts for the names of their colleagues and an introduction. That’s what we did. One thing to note is that local independent agents can often be more hungry and have their ears closer to the ground. They can show you good deals even if they don’t know realise it themselves.
4. Physically go and look at some real live deals.
The best way to really learn is by doing. By getting out and physically looking at and analysing deals you will begin to understand the “rules of engagement” in commercial property investing.
5. What can commercial property do for you?
This is the part where you need to work out what you actually want to get out of this investment lark. Once you have worked out what you want in terms of both time and money, then you can start to reject strategies that will not apply and focus in on what will make the difference to you and your family.
6. Now choose the strategy.
So you have worked out what you want, now you can choose the strategy or strategies that will provide it for you. Understand the price you are going to have to pay and can you afford it. I am not just talking about money but also time and head space. As I say there are some great hands off investments that will give you a steady rate of return for relatively little time input, but if you want to increase the ROI way up into the double figures, which is definitely possible, then you are going to have to put in more than just money.
7. Find a commercial property mastermind to speed up learning.
There is nothing better than learning from others who are going down the same path as you. Shared learning is so much faster than when you are working on you own. Over the years I have been involved in many business incubators and accelerator programmes and I have observed first hand how much the peer to peer support can lift everyone’s belief, aspirations and accountability. Now I have to say it, but check out our website for details on the Commercial property mastermind groups we facilitate. https://www.commercialpropertyinvestor.co.uk
8. Engage with potential sources of commercial finance.
Commercial finance is a bit more tricky to source than residential lending, partly because the pool of lenders is smaller than residential. There are specialist commercial finance brokers, but funnily enough most of our traditional lending has been direct with a well know high street bank. We have also raised quite a bit of private finance over the years and you should definitely consider this as an option. JV and investor finance can be very useful in commercial, particularly if it is from a friendlier source.
9. Source a commercial project that works for you.
So, now we are getting to the sharper end of things. Having worked through the list, you should have figured out what is important to you, a couple of strategies that could deliver it and what a potential project is going to look like to help achieve your desired outcome. It is time to search the internet, hit the road, and get close to your contacts. The deals are out there to be found, often hidden under problems and dressed in wolves clothing. Having focused on what is right for you it will be far easier to sift through the projects and work out which are going to be worth fuller investigation.
10. Learn fast & cheap.
Bear in mind a lot of us learn best from actually getting started and doing something and if this is your preferred way of learning then remember it is sometimes better to start small in order to learn more cheaply than it would be on diving straight into big scary deals.
Technical aspects of commercial property purchasing can be learnt.
There are so many other things to understand when you are investing in commercial property but don’t let that scare you away from a great investment vehicle. People you talk to in the industry might bring up some of the following: Vat, business rates, electing to tax, capital allowances, TOG rules, tax strategies, rules on Tupe, various different types of insurance, commercial finance, deposits, LTV’s, tenant covenant, FIR leases, planning classifications and pension investment rules, to name but a few. Don’t worry, you don’t need to know all of them straight away. These are all pieces of the jigsaw but as the puzzle comes together the picture will become much clearer long before it is complete.
For further information: Keep an eye on our Blogs and articles for detailed information on the more technical aspects. Join the Facebook group to meet others who are on their commercial property investment journey, follow the FB link below. If you are in a hurry then get in touch to see how we can help. Alternatively expand your network and absorb as much as you can so you are ready for the next deal.