Commercial Property

Get a Free Quote Investment Mortgages for Commercial Property
Investors are beginning to realise that in order to minimise their exposure to risk through the property market, it is necessary to hold a varied and mixed portfolio. As part of this hedging behaviour, commercial property is being added to existing portfolios as a way of cashing in on the currently very high rental yields of around 15 percent a year.

Financing a commercial deal requires a slightly different approach to financing a standard buy to let and additional research is required in order to add this type of property to your portfolio.

Commercial Property Idiosyncrasies
Commercial property, by its very nature, is highly dependent on the economy and the commercial factors that drive the market that the commercial property in question services. This means that when the economy in that particular market sector is booming, returns for landlords will be significantly higher than in most residential buy to let investments. On the other hand, if the economy goes into decline, the returns will be much poorer than with a residential let.

Commercial leases also extend for longer periods than traditional residential leases which are typically for 6 to 12 months. Although the days of the 125 lease have all but disappeared, it is still common place to find commercial leases running for 25 years, which understandably requires an entirely different style of management. With a long lease (or at least a lease of more than 7 years) on a commercial property, the tenant will be responsible for a large amount of the repairs and maintenance of the structure and external features of the property, which can have a significant impact on the bottom line of the project.

Commercial Investment Mortgages
In terms of actual process, there is very little difference between a standard residential investment mortgage and a commercial mortgage, the application will take the same format and broadly the same criteria will be applied in order for the lender to decide whether your investment fits in with their criteria.

Bear in mind that you are entering a commercial market and, in effect, speculating on the likelihood of success of that particular market. For example, if you are purchasing hotel premises, you are stating that you believe the hospitality industry is likely to continue booming and you will, therefore, be able to achieve a substantial rent. In order to convince your lender, it is likely that you will have to produce a detailed business plan showing the projected future of your chosen project. For this reason, it pays to select a market of which you have at least some knowledge.

Summary
Bullet Point Commercial property makes a wonderful addition to a mixed property portfolio;
Bullet Point commercial leases are generally for a much longer period than residential leases, thus offering more mid- and long-term security of income;
Bullet Point as the success of a commercial property is often linked to a particular market, it will be necessary to conduct detailed research into the market, both for your own comfort and for the comfort of your lender.

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Typical Interest Payments

First Time Buyers

2.89%

Purchased Fixed

2.89%

Discounted Rate

2.99%

Buy To Let

2.99%

Commercial

3%

 

 

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