What kind of investor are you? And why did you decide to look at commercial property? Answering these questions is the first step to a successful commercial property acquisition, and the team at Prideview Properties can help.
When it comes buying a commercial property investment, the key for any investor is in knowing what you want. To help you understand that, we have identified three major categories of investors, outlining the needs, wants and drivers of each. Knowing which of these categories you fall into will help us find your ideal property so that you can start earning sooner.
This group’s primary focus is maintaining wealth. Those in this category already have a lot of money and simply don’t want to lose it. For them, income is not that important and they will pay full price for the right asset in the right location because they want to make sure their capital is safe and can be passed down the generations. Wealth preservers are highly risk-averse and usually prefer simple, clean assets which require minimal management.
One category of investor that we often see at Prideview with this requirement are “Ultra High Net Worth Investors”. Often they are based overseas or are part of a family office. Their focus is on safe and secure investments, for which they are prepared to pay a premium.
When referring to “income” at Prideview we’re not simply talking about high yields of say 10% plus. For us, a good income-producing asset needs to provide that income for the long term too.
The people looking to purchase a commercial property investment for income purposes typically come from very busy lifestyles. They’re often business people and professionals who already have a primary income stream and they turn to commercial property as a way to build up an alternative base of income. This is important to them because as they wind up their business lives and perhaps look towards retirement they want to be able to live off this income; a wise move for anyone in business.
Because income is the most important thing for this group, securing a loan makes sense here. Borrowing against your investment in the current low interest rate environment can significantly boost the return on your equity, and most commercial property lenders are looking for long-term investments with yields high enough to adequately cover their loan interest.
Income investors are time poor by their nature and don’t have the time to actively manage an asset. They want to buy something and then essentially forget about it, something entirely possible with commercial property investment. If you buy right you can take home four cheques a year, in advance, for the next 10 or 15 years, with little management headache. Income investors are also risk averse because they’ve worked very hard for their money and don’t want to throw it away. What they’re looking for is a nice, secure, long-term plan.
Value-add investors are often lured in by the fact that it sounds easy and fun: you put in £1M pounds and turn it into maybe £1.2M. But, it’s important to note here that like all businesses and types of investments, reward comes alongside risk. Value-add investors generally look at property on a short to medium term basis. They want to increase the income and may look to redevelop the property and then, within the short to medium term they’ll either exit or hold it, but obviously at a higher value.
The common characteristic of value-add investors is that they have experience. In fact, property investment may even be their full time calling. At Prideview we are increasingly dealing with more and more professional investors. Part of the reason for this is that a lot of investors currently looking at value-add have come from the residential market (which is typically more hands-on), and given the current tax scenario within that market, they are looking at commercial property investment as an alternative.
As many already own a residential investment, this group of investors are used to being hands on. Whether it’s sorting out a boiler issue, undertaking a refurbishment, or even a flat conversion, value-add investors are used to getting involved and want to know how to do that with commercial property investment.
No matter what investor category you fit into, our highly experienced team at Prideview Properties can help find a commercial property investment to suit your needs and your budget. With plenty of great deals and opportunities for our clients to pore over from all over the country, there’s no better time to get in touch with our helpful team. Contact us today on +44 (0)208 954 0878 to discuss your investment requirements or visit our current opportunities page to view our latest property deals. Alternatively you can register your requirements with us here and we’ll contact you with some personalised investment opportunities. Our Facebook Live presentation on the subject can be found here.