Before you embark on a property purchase with a commercial mortgage, it would be wise to consider various factors that could essentially make it a successful investment. This blog post intends to convey some key aspects you may want to evaluate before making a decision to go ahead with your commercial mortgage.

1. Return on investment (ROI) and income potential

A commercial mortgage means your ultimate goal is to earn from your investment. Assessing potential incomes such as rentals or business income the property can generate based on market rates and demand is important. You may also want to factor in ongoing expenses such as property taxes, insurance, maintenance, and management fees. By carrying out a simple analysis on your investment, you can determine what the expected ROI is going to be. Careful planning will ensure a good return on investment that not only allows you to repay your loan, but also brings in a profit.

2. Property type and location

Before going ahead with a mortgage, you should identify the purpose of the property. What this means is, aligning the property type with your business needs. For example, retail space for a storefront, an office building for professional services, or industrial space for manufacturing purposes.

Location plays an important role for any business. Ideally you should pay considerable attention to where your business is going to be before embarking on a commercial mortgage. To maximise your return on investment, consider factors such as foot traffic, accessibility, proximity to target customers, and zoning regulations. Prime locations often command higher rental income and property values.

3. Property condition and maintenance

Conduct a thorough inspection to assess the property's condition, including structural integrity, plumbing, electrical systems, and any other factors that may have lasting impact on the property. By doing a thorough assessment, you will be able to avoid unnecessary maintenance costs. And when it does come to maintenance costs,  you may want to estimate the potential maintenance and repair expenses to avoid unexpected costs. Lenders will look at the state of the property you are hoping to purchase. The ageing of the building and its structure may determine how your commercial mortgage will be processed.

4. Zoning Regulations and Restrictions

Zoning regulations in the UK can be pretty strict and you are expected to adhere to them. Ensure the property is zoned for your intended use. Check with your local planning authority. Zoning regulations may also include height limits, building codes, or occupancy restrictions.You will be required to obtain permission from them before starting a business. Getting information on what future development plans lie ahead can be invaluable. Potential changes in zoning regulations could impact the property's value.

5. Financing Options and Mortgage Terms

Always compare interest rates, terms, and fees from different lenders. Lender rates typically differ from lender to lender. Researching the market is a wise way to short list your lend list for deciding on one.

Speak to an adviser at BVS Mortgages and Financial Services LTD. They will have updated market information that could potentially bring you a better deal.

Conclusion

When investing in a property that’s geared to bring you an income, you should pay considerable attention to every aspect of the property purchase, particularly since you are getting a mortgage to pay for it.

By carefully evaluating the factors listed here, you can make an informed decision before selecting a property and embarking on a commercial mortgage. A well-considered investment can provide long-term financial benefits and contribute significantly to your business goals.

Disclaimer: The information provided in this blog is intended for general knowledge and informational purposes only, and does not constitute financial advice.

Commercial mortgages are not regulated by The Financial Conduct Authority.

The products and services promoted here are not part of The Openwork Partnership offering and are offered on a referral basis. The Openwork Partnership accept no responsibility for this aspect of our business. These products are not regulated by the Financial Conduct Authority.

 * Approved by The Openwork Partnership on 25.9.2024

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BVS Mortgages & Financial Services Ltd is an appointed representative of Commercial Finance Brokers UK Limited which is authorised and regulated by the Financial Conduct Authority (FRN 736199) for the purpose of consumer credit business. Commercial Finance Brokers UK Limited is registered in England & Wales under company registration number 06353973. We are a broker, not a lender. We work with the whole of market and may earn a commission from lenders, this amount varies between lenders