A beginner's guide to commercial property investmentBy: Nick Jackson, MLP solicitors

It’s important to have a clear idea of the type of property you want to invest in before you start looking – research is the key. There are a number of trends in the market at the moment that are worth considering.

• An ideal starting point for a first time commercial property investor is small industrial 500 sq ft to 1,500 sq ft lock-ups or starter units. These types of properties don’t offer the greatest covenants, but provide good returns and are easy to let. The best sources to research what’s on offer are agents and receivers.

• Where are you going to invest? Don’t limit yourself to premises in your locality, your money could be performing better elsewhere. The South West is currently producing good return on investments.

• Manage your risk levels - the recession is hitting retail hard, so shop units are quite a risky investment for first-timers. Investors new to the market should consider safer options such as Premier Inns, Travel Lodges and smaller chain supermarkets such as Tesco Express and Sainsbury Local. Most of these franchises and chains have appointed agents and should be approached via a respectable agent acting on behalf of the investor.

• Consider conversion - we’ve worked with a number of first time investors who have purchased bigger sheds and converted them. This type of project will create more work from the outset, as they usually need turning areas and car parking, which will require planning permission, but will provide a sound investment for years to come. If you need to gain planning permission meet with the planners first and consider employing a planning consultant. At your first meeting you should be able to get an idea whether the council will be backing the submission or not.

• Don’t go it alone - if you are thinking of investing in commercial property for the first time taking a collaborative approach is an option and an investment pool is worth considering. This will give you the first-hand experience of the market with the additional security of a joint investment spilt between a pool of other investors. The best way to find and attract potential investors is through networking or using a special purchase vehicle.

• Stick to a checklist - develop a check list to go through on each site visit, look for factors such as: Delivery and turning grounds; WC facilities in each unit, access, the height of the building and eaves. Is it high enough to build a mezzanine if needed, but not too high to make it expensive to heat? 

• The importance of detail - once you’ve found a potential property to invest in, spend time going through all the terms and conditions and small print. Think about what trade the property is going to be used for and whether any specific insurance cover will be needed. Ensure all legal searches are completed and any enquires are thoroughly investigated. Find out if the purchase price is subject to VAT and whether advice in relation to Capital Allowances required. An experienced commercial property legal advisor will be able to steer you through this process. 

• Act like a pro - the most successful commercial property investors have foresight and a determination to succeed. If you can develop these attributes you’ll go far.

About the author

Nick Jackson has been providing legal expertise to commercial property investors across the UK for more than ten years. He now oversees MLP Solicitor’s commercial property department and is based in Cheshire.
In his spare time, when he is not running around after his children, Nick enjoys skiing and playing tennis (though not at the same time).

www.mlpsolicitors.co.uk