The UK residential property market remains buoyant as a result of the various SDLT holiday extensions and the Furlough scheme supporting employees. Yet some investors have turned to the commercial property market to look for opportunities. Recent and further impending planning Class changes from 1st August 2021, relaxing the rules around converting many types of commercial buildings to residential, have meant investors are embracing the potential opportunities this brings.
But the commercial property sector also has its inflated price challenges. And it isn’t just the private residential rental market where the government has imposed restrictions on landlords over evictions or seeking to claim unpaid rent. It is also in the commercial sector.
Although some restrictions are lifting like the Residential eviction ban was lifted on 31st May, there are other more lasting changes that will endure. For example new ‘breathing space’ laws, which might affect the types of tenants residential landlords want.
Whichever type of opportunity you are seeking, remember there are some enduring principles that work whichever the sector, particularly when it comes to due diligence.
UK Residential and Commercial Property: 6 Tips
Check UK Property Title
This is useful to do early on in the process, to look for Title defects or covenants and to get an idea of the pricing history, all of which is useful information shaping the decision on whether to invest and also with the negotiation stance
Whether commercial or residential, this is important. If for example you are seeking to do a commercial to residential conversion, then it is important to check that the area has a sufficiently residential look and feel for. This will increase the chances the end product will work well and be profitable, either as a hold or sell-on opportunity
Sourcing requires similar skills and sources:
Agents – are useful in both sectors although the type of agents differ in their approaches. Commercial agents may talk more qualitatively about the building rather than the numbers, but all agents are motivated to conduct viewings to be actively promoting a property.
Direct to Vendor is a buying strategy for both sectors. For Commercial property tools like LandInsight and Nimbus are used for Land and commercial and can help when checking Title or identifying the owner to approach directly
Google Street views are powerful to show the history of the building for planning and to show how it has been constructed and extended over time.
Checking Property Floorplans
This is a useful technique for ensuring whatever planned building usage changes, the minimum space requirements are met for residential living
Property Tenant checking
Whilst this is important for residential properties, it tends to come at the end of the Due Diligence process. Whereas for commercial it is one of the first priorities to check out the tenant company. This can be done on Companies House if it is a Limited Company to ensure there is a robust income stream and business model to sustain rental payments.
Property Contractual terms
Are important for both residential and commercial sectors, but more so in commercial as the various Lease clauses change the nature of the contract significantly, more so than for a more standard residential Assured Shorthold Tenancy (AST) contract.
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Disclaimer: Property Venture® has outlined information in layman’s terms to enable top line comparisons. Property Venture® is not offering advice. With regard to in-country legislation, letting licences and taxation laws, then you must take appropriate legal or taxation advice during your purchase process, at which time your solicitor or adviser will discuss with you up-to-date legislation and costsTags: Commercial, Due Diligence, Residential, UK