Buy-to-let landlords turning to commercial property

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Many buy-to-let landlords faced with mounting costs are looking at the commercial property market to diversify their investments.

Commercial property includes offices, workshops and other business premises. Another option is semi-commercial property, such as shops and pubs that have a mixture of residential and business use.

As stated in a May 2017 article, the Royal Institute of Chartered Surveyors has said that the commercial property market is in good health, with industrial spaces such as workshops and warehouses performing better than offices and retail property. However, in 2016, after three years of growth, the volume of commercial property traded reduced in 2016, according to estate agents Knight Frank, which blamed this decrease on uncertainty following the Brexit vote.

The decrease in commercial property transactions is mainly in high-value properties. Most small buy-to-let landlords cannot afford these properties and are more interested in lower-value properties such as shops, takeaway outlets and restaurants. The National Association of Commercial Finance Brokers says that demand for such premises has risen by 55% compared to 2016.

Semi-commercial property is popular because the extra 3% stamp duty tax for someone owning more than one house is not charged. The affordability tests for commercial mortgages relating to semi-commercial property are not as high as for residential only property. Rental yields can be 7.6% for semi-commercial property compared to the average of 6% for residential property.

A broker can advise landlords and find the best commercial mortgage deals available for investors.

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