Here at Boxpod, commercial units are our world. Whether you are a business looking for a new (or first!) commercial unit, are a commercial unit landlord that is looking for your next (or first) tenants, or you are an agent that is looking to list properties, we’re the ones for you.
If you are a budding landlord and are thinking about buying a commercial unit for rent, this is a guide to some of the factors that you need to think about before you take the plunge.
What is Commercial Property?
So, to start with the basics, a commercial unit is a property (or part of a property) where businesses or organisations are run from. These will normally fall under one of six categories:
- Retail units – shops, shopping centres
- Offices
- Industrial – including warehouses and factories
- Workshops
- Leisure – cafes and restaurants, sports facilities, pubs
- Healthcare – hospitals, GPs, clinics, nursing homes
When it comes to commercial property in the UK, if you are buying a commercial unit for you to use, it is recommended that you check the commercial classification of the property. Commercial units are given classifications according to what the property is used for. Whilst the classification can sometimes be changed, it is certainly not a given, so it is normally advised that you do not try to change the building’s classification where possible.
If, however, you are buying a commercial unit to rent to businesses, this is less critical, but the unit’s classification and the actions that can be carried out in the unit will affect your calculations of how much tenants can be charged.
Condition of the Building
Although it might seem like a romantic idea to buy a commercial unit as a building project (much is the same way that some people do with houses), you will almost certainly face more challenges – especially if you are looking to convert an existing building into something new – an old house into a shop, or perhaps a shop into a restaurant. This doesn’t mean that it is not possible, but you should carefully look into it before committing.
If you are looking to lease the commercial unit to other businesses, it is important to bear in mind that you will probably be responsible for repairs and ensuring that the building is in good condition when you are renting it out.
Take a Look at the Market
Before you buy a commercial unit, it is worth taking a look at the commercial property market in the area. There are continually changing trends relating to the kind of commercial units that are in demand in any particular area, as well as the presence of existing businesses.
If the unit is a restaurant in an area already with many restaurants, for example, do you plan to open up another restaurant, or do you think it would be better to buy and invest in a different kind of property (or different area)?
Don’t forget that you should be looking to the future. Has the area had a lot of commercial investment recently? Are new housing estates being built nearby? Is a new railway station being constructed? Is a new shopping centre being built, or another attraction that means that the area would be a good place to invest in?
You should also consider general trends – the rise of the need for warehouse space, is the high street attractive for shoppers, or is the area somewhere that businesses would want to base their office, for example?
Mortgages for Commercial Units
For most people who are looking to buy a commercial unit, a mortgage is the best way to get funding for it. They generally work in the same way as a domestic mortgage – available as either a capital + interest model, or an interest-only model.
As with domestic mortgages, there are two kinds available – one for businesses that are looking to buy a commercial unit for themselves to use as their business premises, and the other for landlords to buy as an investment, to rent out to other businesses. You need to be clear about what you will be doing with the commercial unit so that you can arrange for the right mortgage.
Additional Costs
It is also important to remember, when buying any property – domestic or commercial, that there will also be extra costs involved during the process of finding, buying, and getting the unit ready for moving in or renting out.
For commercial units, some of these additional costs can include:
- Payment of professionals such as solicitors, lenders, and estate agents
- Stamp duty (check the current rates and thresholds to understand the exact cost to you). You can check on the Government website here.
- Mortgage fees
- VAT
- Refurbishment and decoration
- Fitting out and delivery of furniture
If you are then looking to rent out a commercial unit, some of the costs could include:
- The cost of finding tenants
- Insurance
- Repairs and maintenance
- Business rates, services, and utilities
- Mortgage payments
Once You Have Bought the Commercial Unit
Once you have bought your commercial unit, you need to make it ready to move into. If you are staying in the unit yourself, you can plan and decorate it in the perfect way for you and your needs.
If you are looking to rent your commercial unit to tenants, it is useful to keep the space as flexible as possible to enable business tenants to come in and adapt it so that it works for them.
When it comes to finding tenants for your commercial unit, come and take a look at our website. Here we can list your commercial unit and find your ideal tenants. With over 3000 searches by tenants every day, we are perfectly placed to help you find yours.
If you are a business looking for a new commercial unit to house yourself, you can look through our list of properties, searching by location, price, and unit type.
Whatever your situation, take a look at our website and see how we can help you today!