Property funding

Moving into commercial property investment is easier with the appropriate business finance in place.

People choose to invest in commercial property for many reasons. Some have experience in residential property investment, and are ready to move into a different property sector. Some have built up a strong buy-to-let portfolio and want to add commercial property into their mix, and others invest in commercial property without any previous property experience. Whatever your reasons for moving into the commercial property sector, you will need correctly structured business finance in order to succeed.

Investing in commercial property involves considering a number of different issues: get it right and you could make a lot of money; get it wrong and you could lose everything. It's important, therefore, that you have access to the right type of business finance before you start, so that you have the means to get into the sector. Here are some aspects that you need to consider:

Commercial property is different to residential property

This may sound obvious, but many people will invest in commercial property feeling that it is a safer option than, for instance, stocks and shares. They think that because they've bought a house or two, they understand the property business. Commercial property is completely different from residential property. For instance, values are more susceptible to changes in the economy, a rise in interest rates or a reduction in demand. So take care.

Length of investment

A balanced commercial property portfolio could include properties that are designed to show a return over a variety of terms - some over 1-3 years, some over 7-10 years and some over say 15 years. In order to achieve this sort of balance, you will need an in-depth knowledge of the commercial property market and correctly structured business finance to assist you. Remember different banks look at things in different ways.

Location

You must consider where you will invest. City centre locations make property more expensive, but also bring the highest rental income. Property that's near good transport links is more likely to attract interest from potential tenants than those that are in rural areas. An improving area could mean an exceptional return on investment when it comes to selling your property.

Rental

Look carefully at the rental income you will receive from the property you are acquiring. What is the estimated rental value (ERV) of the property? Are any of the tenants due for a rent review? How many years are there remaining on the lease and are there any break clauses? These are all important points which you need to consider as you decide how much business finance you need to raise.

Expansion

If you are successful with your initial investment in commercial property, you'll want to expand your portfolio and continue to reap the benefits of well-managed property.

At DIYfunding, we can put you in touch with the lenders who will help you raise the business finance you need to break into the commercial property sector, and who will also help you as you grow your business. To apply, for the business finance you need go to our online application process at www.diyfunding.co.uk

Keith Park