Investors looking for a profitable project have been told to consider the commercial real estate market, as this offers them the chance to either earn a good income on rent or high returns if they sell property fast.
Liz Syms, chief executive officer at Connect For Intermediaries, wrote an article for Bridging And Commercial discussing the various benefits of investing in commercial property.
She noted there are two distinct advantages, with the first being that buyers do not have to pay the additional three per cent stamp duty surplus charge on commercial assets.
Anyone purchasing non-residential and mixed used land over £150,000 has to pay stamp duty land tax (SDLT), with the rates varying depending on the cost of the property.
The SDLT for real estate from £150,001 to £250,000 is two per cent, with this increasing to five per cent for any portion above this.
Therefore, someone buying a commercial property for £400,000, for instance, would have to pay £9,500 in SDLT.
However, Ms Syms noted this is significantly less than the SDLT that would need to be paid on buy-to-let (BTL) properties, as these attract an additional three per cent surcharge on standard SDLT rates. A BTL asset worth the same value, for example, would incur a SDLT of £22,000.
Ms Syms stated the second benefit of commercial property is it is not restricted by the BTL mortgage interest tax relief.
“Fully commercial property can offset all of the mortgage interest payments against the rest before tax is paid,” she added.