The UK offers a variety of commercial investment possibilities and is the perfect place to close a commercial mortgage deal for property investment, business development, or personal purposes. Getting a commercial mortgage in the UK can be very beneficial for borrowers, as they will be able to quickly find attractive investment opportunities in the well-developed local market. Although the task of obtaining a commercial mortgage in the UK can at first be very problematic without specialized help (preferably a competitive UK commercial mortgage brokerage company), once you get your desired commercial loan you will rapidly realize the multitude of advantages, such as: possibility to retain ownership of your business, as well as business premises; gradual capital gain for your business over the entire period of the commercial mortgage repayment; lower interest rates; no rental instability; tax deductibility; highly efficient cash flow management.
The primary advantage offered by UK commercial mortgages resides in the fact that you will be able to retain ownership of your business and your business premises during repayment. As long as you make efforts to repay the loan on time, the commercial lender who has provided you with funding is not entitled to more than receiving interest on the mortgage. Another very important advantage of UK commercial mortgages consists in the fact that once you close such a deal, your business becomes an asset that can rapidly grow in value under favorable market conditions. By closing a competitive UK commercial mortgage, you will be able to ensure long-term capital growth for your business.
Another major advantage of UK commercial mortgages refers to competitive interest rates. Compared to other types of loans, UK commercial mortgages have much lower interest rates, especially in the case of repayments made over longer periods of time. In addition, borrowers can opt for fixed interest rates in order to know the exact sum of money that must be repaid each month.
Stability is yet another advantage if UK commercial mortgages. Unlike those unstable rental payments (which may increase unexpectedly), commercial mortgages eliminate such increases on the premises of less fluctuant interest rates. The stability characteristic to UK commercial mortgages allows for more efficient business planning.
In addition to the mentioned benefits of closing UK commercial mortgage deals, this category of loans also offers the advantage of tax deductibility. Payments are tax deductible and the net proceeds of the loan don't represent taxable income. This can considerably reduce the amount of taxes paid by your business every year. Another notable advantage offered by UK commercial mortgages is that they allow for more efficient cash flow management. Considering the fact that the mortgage is received for a number of years, businesses can efficiently predict their profits and expenses, as well as plan their cash flow management in great detail. With the right repayment plan, UK commercial mortgages are some of the most beneficial types of loans designed for businesses.
Perhaps the easiest option to consider is one of the 20 or so collective funds that invest in the sector. You really do need to do your research and understand exactly what you're investing in. What you'll find is that some funds invest directly in property whilst others invest in the shares of property companies (with the latter being more volatile).
On 1 January 2007 there will be another way to invest. Real Estate Investment Trusts will be launched and about 15 property companies (such as FTSE 100 company Land Securities) are expected to convert to REIT status. REITs will be similar to funds that currently invest directly in property, with sizeable portfolios of assets in the UK and, for some, worldwide.
But why are REITs being introduced?
The main reason is that there will be generous tax breaks for the property companies. REITs will not have to pay income or capital gains tax on the returns produced by their property portfolios, so long as they distribute most of their profits to shareholders via dividends.
Investment Property Databank reports that property has produced average annual returns of 15% over the past 5 years, although Aberdeen Asset Management expects gains to fall back to 4-5% pa over the next few years.
So, should you consider investing in commercial property?
The simple answer is yes, as long as you approach it the right way.
The first step is to pool together all your current investments, including pension funds, PEPs, ISAs and any other equity based holdings.
You then need to analyse where your money is currently being invested. What you'll probably find, especially if you've purchased a number of investments over the years, is that your money is invested in a number of funds. You may even have money in a property fund already.
The next step is to organise your 'asset alloaction'. What this basically entails is making sure your investments are split (percentage wise) in line with your risk tolerance and the potential return that you are trying to achieve.
The main asset classes are Property, Equities (Shares), Cash and Bonds.
So, for example, if you are happy to assume more risk with your investments you may have an asset allocation that looks something like this:
The equities would be spread across large and small capitalised shares, UK, International and Emerging Markets.
The final step would be to choose the appropriate tax wrappers (ISAs, pensions etc). If you already have a number of investments it IS possible to alter the underlying investments whilst maintaining the tax wrapper.
The Financial Tips Bottom Line
Some investors totally ignore (or are not aware of) asset allocation. After all, wouldn't it be strange if you were buying a new car but you weren't allowed to know the size of engine, colour, features etc.
They forget to look 'under the bonnet' and make decisions without all the facts at hand.
When you're next investing (which could be next week if you're investing on a monthly basis) make sure you look at all the facts, set up your asset allocation and increase your chances of a successful 'investment experience'.
Both Groshan Fabiola & Ray Prince are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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