X

Sign Up

or

By signing up I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Sign Up

Sign Up With Facebook, Twitter, or Google

or


By signing up, I agree to Property Tribes Terms and Conditions


Already a PT member? Log In

Log In

or


Don't have an account? Sign Up

Forgot Password

To reset your password just enter the email address you registered with and we'll send you a link to access a new password.


Already a PT member? Log In

Don't have an account? Sign Up

  • Commercial Property

    Commercial vs Residential

    I am a resi landlord considering diversifying for risk management. Any thoughts on the key differences between the two? And advice for what to consider if making the move across...

    Thanks in advance!

    0
    0

    Its possibly easier to start with the key similarities...

    Your still buying a property to let and receive a rental income, you will still need to consider resale/exit options, location, demand, etc, are important but with different criteria and you may consider whether to have a single let or a multi let.

    Almost everything else is different, valuation, finance, taxation, legislation, letting agreement, landlord responsibilities, yield, capital gain, etc.

    One very big difference is that the government aren't continually meddling and changing things.

    I went for a mixed use rental property but a commercial to residential conversion was a close second.

    0
    0

    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer


    Thanks Gary, government meddling I can do without any more of! I have see somewhere with tenants in place returning 7.5% location on the water - on the face of it looks highly desirable. Just wondering what the deal is with maintenance- who is responsible? 

    0
    0

    I only have the one property and the commercial element is on a FRI Lease (full repair and insurance). Basically, I provide the shell of the property and the tenant is responsible for everything internally, including maintenance, gas and electrical tests. They also pay the buildings insurance pro rata.

    0
    0

    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer


    Thanks Gary, can you help with how long do leases tend to be and what happens if a business goes bust?

    0
    0

    Commercial can offer a better yield than residential and with FRI Lease (full repair and insurance) 3, 5 and 10 year terms can look very attractive, especially with established businesses already in situ.

    As ever location, location, location.....if for some reason a business goes bust, depending on demand in the area you could find yourself with long voids.

    But if you know your area and have the right type of property that would appeal to a number of different uses I think commercial can be a great addition giving you a mixed and balanced portfolio.

    0
    0

    In general terms you still own a property and still recieve rental income, but as has been mentioned above one of the biggest differences is the contractural lease between the landlord and tenant. In resi, its an AST, in commercial its usually a FRI (full repairing and insuring) lease. The detail of this lease is what is very important, for example you may have a lease to a tenant for 15 years, but if there is a tenant only break at year 3 - you really only have a 3 year lease.

    It is possible to enhance the value of a commercial property by just re gearing the lease. For example you could agree with a tenant that if they are willing to remove a tenant only break you will reduce the rent or give them say 6 month rent free. By creating a longer lease even at a lower rent it could enhance the value.

    If you are going to look at commercial, you need to get very familiar with commercial leases and their terminology.


    0
    0

    Proplend Borrower Team
     
    T: 0203 637 8418 |  http://www.proplend.com
    15 Little Green, Richmond, TW9 1QH