The Pros and Cons of a UK Commercial Property For Sale
Let’s first take a quick look at the pros of buying a UK commercial property for sale.
A Secure Income
A prime UK commercial property, let out to a "blue chip company" on a full repairing & insuring lease (FRI). An upward-only rent review clause guarantees rental income throughout the duration of the term.
Repairing Obligations
Under a Full Repairing and Insuring (FRI) lease the tenant is responsible for the repairs and maintenance of the interior and exterior of the building. Every 3 to 5 years, the tenant is responsible for redecorating the property internally and externally under the terms of the lease.
Net Income
With a UK commercial property investment, 95% of the rental income should be net to the landlord. Compare that with 85% for residential property.
Tangible Asset
Property plays to an investors gut instinct. If you’re feeling nervous about your investment you can walk around the asset and give it a good old kick.
Of course there are also disadvantages to the asset class:
Transactions Costs
A UK commercial property for sale attracts Stamp Duty up to 4%.
Capital Investment
You need serious money to enter this sector. 30% deposit is the norm. Commercial mortgage lenders prefer to lend only 70% LTV on commercial premises.
Liquidity
This is the biggest disadvantage for buying commercial properties. In a weak market, a sale can be a slow and difficult process.
For example, if you want to sell shares, you can pick up the phone and liquidate your share portfolio within days. Try doing that with property. It could easily take you up to a year to sell commercial properties depending on the state of the market.
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