Commercial valuations can often be confusing to the uninitiated. Some of the basic principles are as follows:
Commercial property investments are assets where their value is linked to the amount of income they will produce in rents from tenants.
A commercial property can only considered cheap if the income from the rent will exceed by a significant margin the cost of purchasing and running it.
Investing in Commercial property is not about bricks and mortar or capital gain.The tenant is the value within the investment. Better tenants equal better rent which in turn equals higher values.
The types of commercial property investments include office, industrial, retail, food, pubs, hotels and apartment bocks. Even the most seasoned property investor would tend to stick to one of those types and get to know the sector well.
Finding & Acquire Commercial Property Investments
If investing in commercial property its vital to establish relationships with professional commercial brokers will will know their market intimately, along with the majority of the potential sellers in an area. A skillful commercial property lawyer will be required to guide the process of structuring the deals.
As with any property deal, seek property owners who might have a reason to sell at a discount. For example older shop owners will look to liquidate their assets as a form of estate planning when they are getting ready to retire.
In a recession many owners are having a difficult time making payments on the attached loans and are probably willing to sell to cut losses. Repossessions for commercial properties will also be more available as lenders seek to offload expensive prior loans on commercial assets.
It’s quite difficult to borrow money to buy commercial property and you must demonstrate to a lender that the property will provide enough income for you to keep current on the loan. Loan are typically set 50-60% loan to value, so a higher deposit will be needed than for residential.Repossessions will often will need cash to do the deal.
As with all property, pricing is negotiable, except when the property is sold by auction.