consider adding commercial property to your portfolio. While
most investors focus on residential properties, commercial real
estate offers unique advantages that can boost your returns
and provide long-term financial security.
Here are three key reasons why commercial property is a smart investment:
1. Pay Less Tax
- Offset mortgage interest as an expense.
- Claim capital allowances, reducing taxable profit.
For example, I recently had an offer accepted on a commercial property, and I expect to claim around £140,000 in capital allowances. That means I won’t need to pay tax on my profits until I’ve earned over £140,000! This is a huge tax-saving advantage that isn’t available in the same way with residential properties.
2. Longer Leases = More Security
Unlike residential tenants who might leave after 6–12 months, commercial leases typically last 10–15 years. That means:
- More stable, predictable rental income
- Less tenant turnover and void periods
- Stronger long-term cash flow.
With a long lease in place, you don’t have to worry about constantly finding new tenants or dealing with frequent vacancies.
3. Higher Yields & Less Maintenance
Commercial properties often generate higher rental yields compared to residential properties. Plus, you can secure a Full Repairing and Insuring (FRI) lease, which means:
- The tenant covers all maintenance costs
- You don’t have to worry about fixing boilers or dealing with minor repairs.
- Your income remains passive and hassle-free.
This makes commercial property a great option for investors looking for strong returns without the day-to-day headaches of residential property management.
The Downsides of Commercial Property
Of course, no investment is perfect. Here are a couple of things to keep in mind:
-
Higher mortgage interest rates – commercial loans typically have higher interest costs than residential mortgages.
-
Less capital appreciation – over time, residential properties generally see faster value growth compared to commercial properties.