Freehold and Leasehold Property

If a commercial property buyer purchases a freehold property, it allows the buyer to lease out some or all of the units of the property at a later date.  The commercial property buyer will of course be liable for any ongoing maintenance or repair work that the property needs whilst tenants are in place.

If the commercial property buyer decides to purchase a leasehold building, it means that the commercial property buyer has bought the right to use someone else’s property as their own for a given length of time – the duration of the lease.  Depending on the type of lease, the commercial property buyer may find that they have less responsibility for the upkeep of the property.

Advantages and Disadvantages of Commercial Property Buying

A potential buyer needs to think very carefully before deciding to purchase such a property.  There are a number of advantages for a commercial property buyer including the fact that the worry of increasing rent in a leased property no longer exists.  The property will almost certainly increase in value over time and when the moment comes to sell there will be a capital gain.  In addition, the interest payments on commercial mortgages are tax deductible.

Disadvantages include the fact that a commercial property buyer will need to put down a hefty deposit, of around 20 to 30 per cent of the value of the property.  In addition, if the value of the property goes down it will adversely affect the property buyer’s capital return.