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Key selling points
- Turnkey solution to commercial property investment
- Entire process is fully managed
- £20,000 equity
- Guaranteed rental
- Low deposit
This commercial investment will be managed for you right from the very start, which includes conveyancing, commercial mortgage, guaranteed rental, etc.
Traditionally, to buy into commercial property, you'd need a cash deposit of between 25% and 50% for a purchase: not so in this case.
The deal is superb, as it provides you with a unique complete solution to commercial property investment.
The builder asks clients for a 10% deposit + VAT, then creates a 20% deposit for you from that. Your VAT is then refunded, as the company sets up an SPV (Special Purpose Vehicle) company on your behalf. It's all part of the service.
Upon completion, the builder will pass your investment to their commercial department, who then offer you the 1st year’s mortgage paid, and will tie a tenant company into a 5-year lease, to give you between 8-8.5% yield.
The commercial department will charge 8-10% for this service. Maintenance will be approx. £2 per square foot and this will cover cleaning and receptionists. Additional meeting rooms will be free of charge to the leaseholder.
The guaranteed 8% return includes the service cost, because that £1,000 is charged to the tenants, (unlike Residential BTL, where the landlord would pay).
These units are off-plan, with an estimated completion date of December 2008). Today's market price is £100,000, but anticipated value on completion is £120,000. Hence there is equity of £20,000. Blackpool Airport has been growing of late, with seven international flights now servicing this location. Many industrial units are springing up around the area, especially firms specialising in distribution and logistics. The well-established builder has a successful track record using this business model.
The Deal in Detail
Now
£2,500 (Introducer’s Fee) £2,000 (Reservation Fee)
30 days
£7,995 (Balance on deposit) £1,750 (VAT on Reservation & Balance above only)
Sub-total: £14,245
Completion
£0 (IFA arranges commercial mortgage for balance and SPV refunds VAT. This is a free service)
Sub-total: £0
£1,750 returned on completion
Total cash in: £12,495, equity: £20,000 + positive cash-flow.
Why Invest in Commercial Property?
Commercial property investment allows you the opportunity to spread your risk from the normal Buy-to-Let residential investment.
It also usually brings tenants staying for a minimum of 3 years and up to 10 years, which clearly reduces your voids.
It is generally more of a hands-free investment than residential property investment, with your tenant paying for any maintenance/wear and tear during the length of their lease. Currently, leases only allow upward rent reviews!
FOUR reasons why we’re at the start of a commercial property boom…
1:The UK commercial property sector has plenty of room for growth. The proportion of the capital stock that is made up of commercial property is less in the UK than in any of the other G5 nations. Also, the share of UK GDP accounted for by commercial property is below the OECD average. Unlike residential property, this is a sector with loads of room for further growth!
2: Britons are living (and working) longer. In the 1980s, average life expectancy was 84: it’s now 92. That means that, by 2020, there will be 10 million more people in the UK. Add into the mix the fact that people may soon be forced by law to work during their 60s - and you’ve got an even bigger demand for work space. That means greater demand for commercial property!
3: More and more economic migrants are coming to the UK to work. Over 350,000 have come from Poland alone since the enlargement of the EU (to 25 countries in 2005). Again, more workers mean more demand for commercial property.
4: Housing market uncertainly is turning people to commercial property. RICS expects the commercial property market to grow 16% in the next 12 months.
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