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Landlords should think commercially

In recent years, the investment performance of the commercial property market has been strong, consistently outperforming other investments. Similarly, the buy-to-let market has seen strong growth. In fact, it is estimated that around 11% of the UK’s housing stock is held by private investors, showing there are now a lot of experienced residential landlords in the country.

So it comes as no surprise that an increasing number of residential buy-to-let investors are looking to add commercial properties to their portfolios. Commercial First has been quick to spot this trend and recently launched a range of investment mortgages called Commercial Inv-estment Mortgage Plus, aimed at this group.

The Mortgage Plus design is bold, funding up to 85% of a property’s value and requiring rent to cover 100% of mortgage repayments.

Unlike some other commercial investment mortgages, these products are simple and in some ways similar to residential buy-to-let mortgages, which means the range is likely to be perceived as accessible and will appeal to residential landlords.

Of course, the commercial market is different from the residential sector, with office, retail and industrial space attracting different types of tenants and rental incomes. And there are other factors to consider when investing in commercial property too, such as parking and transport links.

But one benefit of investing in commercial properties is that they can be easier to manage and maintain. Commercial leases tend to be between five and 10 years compared with much shorter leases for residential tenancies. And commercial tenants are more likely to maintain and even upgrade premises themselves in the interests of enhancing their businesses.

Wisely, Commercial First’s product range is not available to novice investors. Applicants must demonstrate success with another resiandy young is chief executive of The Business Mortgage Companydential or commercial investment property.

However, this is unlikely to be a barrier to the growing number of residential buy-to-let landlords, many of whom already have over 20 properties in their portfolios.

Commercial property investment provides a great opportunity for residential landlords looking to diversify their investment portfolios.

The strength of the commercial market means that landlords can invest confidently, provided they research the location of their property, and the return on their investment is likely to be higher than in the residential market. New commercial landlords will have unfamiliar risks to face but the high potential rewards mean this could be a step worth taking.

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