are many types of commercial property but I thought
I would keep this article to one theme.
The theme I've chosen to concentrate on is: Shops
and Flats. I have chosen this particular topic because
I believe it offers the most flexibility in terms
of the options commercial property can present.
I could just as easily have spoken about warehouses,
factories, even shopping centres. Lets face it commercial
property is a wide reaching subject and we have
to tame it in order to really comprehend it's potential.
So lets start by talking about commercial property.
At the time of writing, the legal implication is
that you can foist all responsibility onto the leaseholder(tenant).
That means a full repairing list issued by you the
free holder can insist that certain works and standards
are kept. So you can be reasonably sure that your
tenant won’t ring you up and ask you to do
repairs. On the contrary, you will be making sure
the tenant is doing the works and you can legally
enforce him to do so .
Many people have turned to commerical property because
you can get a “set and forget” deal.
You can even buy property with great tenants who
are just happy to carry on trading for many years
to come. You even get a chance to review their rental
in writing! They may have actually signed that you
can increase the rent at set periods. Great! But
what else do we need to know?
• Well how about how to calculate the value
of your property (or potential purchase)? Well here
are some figures ......
• 10% yield means that if you were getting
12 000 PA you can value this at around 120,000.
• But if you have one of the better names
in the retail trade you can definitely expect a
• On a blue chip tenanted property you have
the same yield of 12 000 but only 5% yield meaning
the same property is worth £240,000.
• So the multiples on a rental yield of 5%
give a much higher value than your 10% yield.
The quality of the occupant is key for reliable
rental payment and trouble free income.
It is done and it can be done.
Now we get to the shops and flat bit:
• Suppose the tenant is not able to pay the
rent? Or you find that the size of the shop is too
big for the purpose the market dictates.
e.g. You don’t need a ballroom for a takeaway!
• You also have the possible scenario that
the market for commercial property is down (like
now) but that accommodation is doing very well...
...in such a case, supposing you have 2 flats above
and a shop below, with a certain amount of adjustment
you can change your 2 flats into 3 and add 4th flat
at the rear of the shop.
accommodation? Don’t want flats? Providing
the covenants allow, you can move them all into
offices for a long or short let.
This flexibility gives you great opportunities to
change the usage from flats to offices and from
a vet to an internet cafe.
However, the risks can be higher than in residential
investing. A plot for commercial property fell from
900k to only 250k. A change of tenant can bring
on the same.Thats why, in a good area, the combination
of shops and flats is something, that when looking
for property, makes good sense .
Higher yields and larger numbers can cloud your
judgement but with a creative attitude it can really
be good for you. Its about keeping your commercial