Level of investment and return

Commercial property investment starts at a similar level to residential property investment but progresses to a far larger scale. Naturally, the further you go up this scale, the more risk is involved. Ultimately, you need to decide how much capital you can afford to risk on your investment, including significant amounts for ongoing costs for the lifetime of your investment, such as monthly mortgage repayments and property management fees.

Once you know this, you can select a commercial real estate that falls into your potential level of investment. But don't leap at the first property that you can afford to invest in. Once you've found an area with purchase prices close to your range, shop for a good deal for your money. For example, in a particular area, you may be able to get more for your money in warehouse space than in shopping centres.

Alternatively, office space in a suburban town might be far cheaper than a similar property in a large city. These are serious considerations you must think about when investing in commercial property. All of your returns, and therefore profits, will depend on a vast array of factors, including a location's workforce availability, infrastructure and other socio-economic conditions.

You should also remember that commercial leases are far longer than residential ones, with the average lease length running between 10-15 years. Therefore, you'll need to prepare for times when your commercial real estate is vacant, with no rental income being brought in.

The long or short-term investment

Most people believe that commercial properties are best for short-term investments where you can get rich quick. But this isn't the case. There are many pitfalls commercial real estate investors can fall into regarding commercial property investment. 

Everything from seasonal fluctuations in performance to regional regeneration projects or town and country planning can affect your property, depending on your location. You need to take all of these into consideration when choosing the right commercial property to invest in.

Have a timescale in mind

Having a specific timescale in mind, alongside detailed investment strategies, is another crucial consideration when investing in commercial property. These time considerations may include:

 Whether you want an immediate return on your investment

 If you are patient enough to wait for the ideal opportunity

 Whether you have found the perfect opportunity locally and need to act quickly to secure it

 If you fully understand your investment goals, how and where you will finance them (commercial mortgages or otherwise)

 Whether you are happy to survey the market over the long-term to understand what investments provide acceptable returns for you

Retail, office or industrial?

Knowing what type of commercial buildings you want to invest in is also a crucial decision to make. For example, you may want a property that is close by, allowing you to visit and keep an eye on it more easily. Alternatively, you may think investing in a retail property within a popular commuter town with plenty of customers, and excellent transport links may be more profitable.

Personal insight or experience within a particular industry or business can be invaluable when investing in commercial property. For example, you may know where certain gaps in certain markets can present opportunities or which property types certain businesses prefer. You can see just how much thought is required before you invest even a single penny. 

Reasons for investing in a type of property

Reasons for investing in a certain type of property will be fairly clear for seasoned investors in commercial properties. After all, you know your motivations better than anyone. Whether you do it to make the most of your industry knowledge, if you enjoy refurbishing commercial properties, or merely for pure profit, there are many reasons to get into commercial property investments.

However, if you're buying your first commercial property, it's often best to figure out your reasons for investing with professional assistance or at least by talking to those with experience. Commercial property solicitors, property experts and certified commercial investment members can warn you of a bad deal or tell you when you've found one suited to your goals. We can also advise you of the finer points in your lease agreement, providing an experienced eye to all your commercial investments.

Lease or purchase?

Whether you are suited to commercial property buying or leasing will depend on a few things, including your experience and investment knowledge. Both approaches have advantages and disadvantages, so novices should again seek professional advice to avoid issues.

Once you have found a property you like, speaking to a commercial real estate expert is the best way to understand the implications, clauses and other technicalities you could face with a lease.

Where do you want to invest?

The location of your investment property is also crucial. Some investors wish to keep their properties close to home since they know the area and can anticipate the level of business it could receive.

Alternatively, you might choose a location on the other side of the country, given that there is potential for greater earnings in a different area. These are things you must consider and can discuss with a commercial property expert.

How will you invest?

Again, two of the most useful ways to reliably invest in commercial real estate are direct property investment, if you have the necessary capital for costs such as stamp duty etc., or indirect property investment, through a bricks-and-mortar fund. Direct investment exposes you to the risk that the property might not always be occupied, reducing potential returns through extended periods.

However, you will have complete control when selling property within your portfolio.Indirect investments are a little safer since you'll be investing in a company that has numerous commercial properties on its books. Therefore you are automatically diversified, which spreads your risk and guarantees a good ROI (return on investment). However, you won't have control over the properties the company owns unless you invest enough to secure a majority ownership.

Property experience 

Consider your level of investment experience and how prepared you are for commercial property investment. For example, commercial landlords with a buy-to-let property might consider branching out into something riskier that provides larger rewards.

Alternatively, you could already be a successful investor with a portfolio full of successful stocks and bonds and are simply looking to diversify. However, if you're neither of these and have no experience, again, you should seek advice.

Speak to a specialist

Investing in commercial properties can be a difficult and confusing process, which is why those with no experience should tread carefully. If you are unsure of what you're doing at any stage of your investment process, you should speak to a commercial property specialist and gain a little insight into your situation. 

These experts and legal services can offer advice on everything from choosing a property to leases and everything in between.