Introduction
When purchasing a property there are a number of important factors to consider, from the location of the property to the type of financing available to you as a buyer. This article will discuss the process followed when purchasing a commercial property in the UK and outline some helpful tips to consider.
The first step to purchasing a commercial property is identifying a suitable property. When identifying a property it is important to consider a number of factors, such as the location, size and type of property. The location can have a crucial influence on the current and future value of the property. Given that different locations have different demographics, it is important to consider the demographics of the area around the property, these may include, average income, average property price or average rental value. Moreover, it is important to consider the size and type of property you wish to purchase as this will further impact the value of the property.
Once a suitable property has been identified, purchasers will need to obtain finance for the purchase of the property.
There are a number of different types of finance available to purchasers, each with their own advantages and disadvantages.
Purchasers can obtain a mortgage to assist with the purchase of the property. Mortgages are often the cheapest option available as they can be obtained from high street banks. Mortgages also have a long term and can be stretched anywhere from 2 to 40 years in some cases. Mortgages allow the borrower the option of making small regular payments towards the purchase price of the property rather than one large payment. This gives the borrower/purchaser a greater degree of financial flexibility. Given the long term nature of mortgages they often require a long due diligence and timely application processes.
Purchasers can access a bridging loan to assist them with the purchase of the property. Lasting anywhere from 1-36 months, bridging loans offer a short-term financing solution. Bridging loans have shorter application processes and can often be obtained in a few weeks. As a result of this, they are well suited to purchasers looking to take advantage of a limited time offer. At the end of a bridging loan, the facility can be refinanced onto a longer term mortgage. The increased flexibility of a bridging loan comes at a higher price, as interest rates are often higher for a bridging loan than a traditional mortgage facility.
Borrowers can purchase the property in cash. This allows the purchaser a great deal of flexibility as they do not need to wait for approval from the bank prior to purchase. This means that the borrower can act quickly on limited time offers. Furthermore, by purchasing the property in cash, purchasers are not subject to monthly payments. On the other hand, purchasing a property in cash may not be the most efficient use of a purchaser’s cash, locking it into a highly illiquid asset for an unknown period of time. When considering which property finance route to take it is important to consult your mortgage broker. A commercial mortgage broker can leverage on their years of knowledge and expertise to find the best lender and facility for their clients.
There are a number of helpful tips to consider prior to purchasing a commercial property.
When purchasing a commercial property it is important to consider the macroeconomic factors influencing the property market. While commercial properties can be a good investment it is vital to ensure that there is a rental demand for the property you wish to purchase.
It is important to conduct a thorough due diligence prior to purchasing a commercial property. By analyzing the town planning documents, current financials and tenancy schedules, purchasers can get an in-depth analysis of the overall health of the property allowing them to make a fully informed decision on the feasibility of their investment.
It is important to ensure that the property has been well maintained and is well-constructed. In order to ensure that there are no hidden repair costs, purchasers should examine the property with a qualified building inspector to ensure that the building adheres to all regulations and bylaws. This will help the purchaser to reduce repair costs and ensure they are fully informed in their decision to purchase.
Conclusion
Purchasing a commercial property can be a profitable venture, but it is important to ensure that the purchaser is fully informed prior to purchase. In order to make a fully informed decision it is important to conduct a full inspection and due diligence prior to purchase. Moreover, deciding on how to finance the purchase will influence the overall profitability of the investment. With this in mind it is important to consult a independent mortgage broker. Mortgage brokers can leverage their knowledge and experience to assist in securing the facility that is best suited to the purchaser’s needs.
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