Many investors who are looking for diversification may put real estate investment into consideration. For those who would like to focus more on income than capital growth, retail property might be worth considering because they can be very high yield. The retail sector is mostly sensitive to economic climate. Somehow, many inexperienced investors might have difficulties in investing in retail property for the very first time. Some basic guides below may worth you to deal with it.
As with any property investment, the most crucial aspect you have to firstly bear in mind before investing in retail property is about the location of the property itself. Capital cities and neighborhood shopping areas such as Birmingham, Manchester, and other spots in the UK are likely profitable. Additionally, location indeed plays a critical role in the retailer’s success. Areas with large amounts of foot traffic are most desirable because they can directly attract and guide pedestrians to come in to the retailer’s shops. Accordingly, your tenants will be happier as their business performs better and yields decent returns. Therefore, it is indeed make senses to find a retail property that is easily accessible and convenient for shoppers to get to.
Indeed, you need good financial support in order that your investment could be managed in the desired way. You can take out a bank loan to fund your investment. Yet, banks are usually only prepared to lend up to 60 or 65?per cent of the value of a retail premises.
you need to have an excellent understanding of leases or rent agreement. They set out the rent and any incentives, such as rent-free periods or help with fit-outs you would provide for your tenants. They are important to protect you against lost income in case that your tenants go out of business in the meantime. Thus, it is sensible to have the leases run for at least five years. It is also worth to ensure that your tenants have supplied a bank guarantee of at least six months’ rent. Additionally, there are disclosures which you need to carefully check because they specifically include other details of the agreement such as who pays for marketing promotions, outgoings electricity, etc.
It is sensible to know as much as you can about your tenants including what their occupancy cost and sales are, and their ability to pay the rent in order to secure your property investment. If you have a reliable tenant on a lease with plenty of the term remaining, then you can minimize the risks.
Overall, investing in retail property is just similar to investing in other property types. There are plenty of opportunities for you to begin even with only a small unit. Also, it is advisable to keep your tenants’ business outperforms under the contractual period in order that the rents can be extended and beneficial for both you and your tenants.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.