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Getting Started in Commercial Property

Suzi Carter, a Chartered Surveyor with 25 years’ experience in the commercial and residential property sectors, comments

As the residential property market is becoming increasingly competitive, the returns from commercial property are looking better and better. Now is a great time to diversify your portfolio, and 2022 market conditions are a ideal to create value in commercial property. High inflation means that your cash deposits are being eroded whilst rental values and capital values are rising rapidly in line with the high inflation.

But a question that I regularly get asked is how do I get started in commercial property?

Before you start, it’s important to pause and ask yourself what you are looking to achieve from your investing. Many investors are currently purchasing commercial property purely for yield in order to stop their cash eroding in the bank; others want to add value to get their money out, and others want pure cashflow. It’s also important to understand your starting point - how much available equity do you have to invest in deals, and do you have access to investor finance? What’s your likelihood of obtaining commercial finance (speak to a good broker who can help you with this one)?  Where is your investing location and what can you buy for your available money and, most importantly, what is your knowledge base for starting to invest in commercial property?  

I set out below my 8 Step Process to get started with your commercial property investing:

1.  Knowledge
There are many different commercial investing strategies that you can employ. As it is a relatively complex investing area it’s important to get some help along the way to at least get you started. Knowledge is key because (and as I have seen with many of my mentees in the Commercial Property Academy) the obvious strategy is not always the best one. I see many people entering the market to do commercial to residential conversions, and whilst this can be a great strategy in some locations, it may not be the best, or only, strategy you can employ. This is especially true in uncertain economic times, where you must remain nimble and model multiple exits to make sure that you are maximising returns, whilst reducing your risk.

2.  Commercial finance
It’s important to understand what finance may be achievable before you invest. Make sure you have a great commercial broker on speed dial and speak to them well before you start to invest, as well as before you submit each offer.

Commercial finance is generally more expensive than its residential counterpart, and with lower loan to value ratios (LTV’s). There are some commercial strategies, however, such as commercial to residential, where you may be able to achieve higher LTV’s value and better rates – this could influence how you niche your strategies.

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