How to get into commercial property?
Establishing what 'getting into commercial property' means exactly
‘Getting into commercial property’ can be defined in multiple different ways. You can become a tenant and occupy a commercial property or purchase a commercial asset and ‘get into commercial property’.
In this blog, we’re taking assumption of getting into commercial property as a means of entering the sector to earn a salary or monetary benefit from the space
Getting into commercial property derives from the investment of funds into a commercial asset. Purchasing, letting, flipping or rent to rent are all pathways of entering commercial property.
Purchasing commercial property
Obtaining a mortgage or outright purchasing a commercial property premise is a direct route to entering and ‘getting into commercial property’. Once any outstanding loans on the property are paid off you will outright own the commercial property and can move forward from there.
The majority of commercial lenders will require a significantly higher deposit than residential properties and typically a deposit of 20-40% of the total amount is required
Unless you have the funds to completely purchase the commercial asset without requiring any loans, once you’ve secured the property, you’ll then begin paying back your borrowed amount. Whether by interest only payments or capital + interest, you’ll more than likely be paying the loan back monthly for over 20 years depending on your mortgage product.
Letting commercial property
Letting a commercial property yourself will first require purchasing one. However, commercial property strategies such as rent to rent exist which essentially allows a tenant to re-let occupation of a premise to another tenant.
Options such as rent to rent are increasingly difficult than simply letting your own commercial property as permission must be gained within your lease to sub-let the premises. Many landlords avoid sub-letting clauses amid increased risk and diluted responsibility. Make sure sub-letting is permitted in your lease before performing a sub-let to avoid risk of forfeiting your lease.
Flipping commercial property
Flipping commercial property involves a purchase and sale of a commercial asset split by a shorter time frame containing refurbishment and re-development of a premise.
Involving more risk and more reward than simple purchasing and letting a unit, flipping commercial properties is a full time job and often requires a large upfront cash investment to get started. Time is money in flipping property and the longer the frame between acquisition and disposal the lower the profit margin.
Above is an extremely shortened and surface level view for ‘getting into commercial property’ and there is a multitude of different weird and wonderful ways of entering the sector
You don’t have to be a Forbes Rich List member in order to educate and delve into commercial property and many ways of entering the space can be done cheaply to gain a significant amount of knowledge and experience.