Be Like The Blairs – Is Purchasing Commercial Property The Better Option?
Tony and Cherie Blair are known for their successful property empire. Since they left Downing Street in 2007, they have purchased 38 properties, banking around £1.7 million in profits.
They have recently made their first commercial property purchase of an office with potential development opportunities.
This then raises the question, is it worthwhile to purchase commercial property like the Blairs or stick to purchasing traditional residential buy to lets?
Many Investors face the question as to whether it is best to purchase a residential investment property for a buy to let or whether to purchase a commercial property. The vehicle used to purchase the property also needs consideration. If you set up a company to purchase the property, then one advantage is that the managing fees, maintenance fees and all other costs incurred would be incurred to the business rather than the individual purchaser. The tax position may also be preferable to purchasing in your individual name.
Be aware though – if you purchase in a company and you or the other directors already own property, then the company will still have to pay the higher stamp duty land tax rate of 3%.
The income from the investment property also adds further income into the business but you will have to pay tax on this income.
There are usually less emotional ties when purchasing commercial properties. The property bought is not your “home”. Residential buy to let properties tend to be more labour intensive as the tenants are on shorter leases which need to be renewed more frequently.
Commercial properties tend to have longer commercial leases for the occupational tenants and this can mean that there is more stability and less day to day management involved.
It therefore seems that the Blairs have taken a sensible approach by purchasing commercially and we expect to see an increase in this method with future investors.