Investing in commercial properties can be more exciting than residential properties. They offer a better yield since tenants are businesses, and it's usually less hassle in negotiating with them than individuals in residential homes. Lease can be longer, providing some form of stability. So how do you invest in commercial properties?
Financing under personal or company
Commercial and residential property can be bought as an individual or through your company with a commercial real estate loan in Singapore. However if you use your company in making the purchase, you will require more procedures, paperwork and possibly a longer processing time.
The documents you need while buying as a company include audited accounts, profit and loss statements, your bank statements and income tax statements of directors.
The key figures to check on company statements and documents include positive cash flow and net worth, profit, a committed paid up capital, regular monthly collections and healthy functional bank statements.
Many commercial and industrial properties are owned by its operating businesses as it's better for a stable business to buy than rent their office space. Not only are mortgage monthly payments lower than monthly rental, at the end, you own the place as well. Moreover, as owner of the property, you reap the rewards of capital gains on value appreciation. You also do not depend on the whims of the landlord.
Some business people buy a 2 storey commercial establishment to lease out one level and keep the other for their own use. This way, the monthly mortgage payments can be paid through rent while you have your own space to run your business. In case you need the other level when your company grows, you can just take over the other rental level once the tenancy agreement expires.
New commercial property investors may find the loan to value eligibility a bit confusing for a commercial property loan in Singapore. Moreover, the factors to consider and options to decide on are all different. Hence you should talk to various bankers and compare the commercial property loan rates.