There are many types of commercial property but I thought I would keep this article to one theme.

The theme I've chosen to concentrate on is: Shops and Flats. I have chosen this particular topic because I believe it offers the most flexibility in terms of the options commercial property can present.

I could just as easily have spoken about warehouses, factories, even shopping centres. Lets face it commercial property is a wide reaching subject and we have to tame it in order to really comprehend it's potential.

So lets start by talking about commercial property. At the time of writing, the legal implication is that you can foist all responsibility onto the leaseholder(tenant).
That means a full repairing list issued by you the free holder can insist that certain works and standards are kept. So you can be reasonably sure that your tenant won’t ring you up and ask you to do repairs. On the contrary, you will be making sure the tenant is doing the works and you can legally enforce him to do so .

Many people have turned to commerical property because you can get a “set and forget” deal. You can even buy property with great tenants who are just happy to carry on trading for many years to come. You even get a chance to review their rental in writing! They may have actually signed that you can increase the rent at set periods. Great! But what else do we need to know?

• Well how about how to calculate the value of your property (or potential purchase)? Well here are some figures ......
• 10% yield means that if you were getting 12 000 PA you can value this at around 120,000.
• But if you have one of the better names in the retail trade you can definitely expect a better yield...
• On a blue chip tenanted property you have the same yield of 12 000 but only 5% yield meaning the same property is worth £240,000.
• So the multiples on a rental yield of 5% give a much higher value than your 10% yield.

The quality of the occupant is key for reliable rental payment and trouble free income.
It is done and it can be done.
Now we get to the shops and flat bit:

• Suppose the tenant is not able to pay the rent? Or you find that the size of the shop is too big for the purpose the market dictates.
e.g. You don’t need a ballroom for a takeaway!
• You also have the possible scenario that the market for commercial property is down (like now) but that accommodation is doing very well...

...in such a case, supposing you have 2 flats above and a shop below, with a certain amount of adjustment you can change your 2 flats into 3 and add 4th flat at the rear of the shop.

Student accommodation? Don’t want flats? Providing the covenants allow, you can move them all into offices for a long or short let.

This flexibility gives you great opportunities to change the usage from flats to offices and from a vet to an internet cafe.

However, the risks can be higher than in residential investing. A plot for commercial property fell from 900k to only 250k. A change of tenant can bring on the same.Thats why, in a good area, the combination of shops and flats is something, that when looking for property, makes good sense .

Higher yields and larger numbers can cloud your judgement but with a creative attitude it can really be good for you. Its about keeping your commercial investment commercial.