Attractive returns can be made in the commercial property sector, says Arnolds Keys managing partner Guy Gowing.
There is something about investment that attracts exaggeration. During the rapid growth of the buy-to-let sector, we saw promises of huge, almost risk-free yields to be made from residential lettings. Now we are seeing equally over-stated predictions of a crash in that market.
This week one property firm claimed that 140,000 residential landlords have sold up in the past 12 months simply because they have reached retirement age and want to cash in their nest eggs.
Though this story is rather stronger on rhetoric than it is on evidence – despite well-publicised issues, the residential lettings market remains strong – there is some indication that buy-to-let landlords are exiting the market due to a changing tax environment and the effects of stricter environmental regulation.
The buy-to-let sector is unique in that a meaningful proportion of investors are what might be termed ‘accidental’ or ‘amateur’ landlords. By this I mean they either fell into being a landlord (by inheriting a property, for example) or their investment is not their main source of income.
Commercial property investment is often – wrongly – viewed as a closed book to this kind of investor. While we can all understand what is involved in renting out a home, many view buying and managing a commercial property as a more opaque, more involved process.
It’s true that a more professional approach might be called for. But that does not mean that the commercial property market shouldn’t be an attractive and accessible prospect for people who might be considering alternative property investments.
The good news is that there are attractive returns to be made in the commercial sector. This is a market which investors don’t necessarily need huge amounts to enter (a common misconception) and where leases tend to be longer-term than in the residential sector.
Professional advice is crucial, but small-scale investors can succeed just as much as large institutional landlords. The most successful investors are those who are willing to listen to level-headed advice, rather than being swayed by exaggerated claims.
For more information, visit arnoldskeys.com
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