Landlord Products / Services
Have you ever watched a documentary of an antelope getting taken down by a pride of lions? That pretty much sums up my experience with commercial lettings.
Dear friend, have I ever told you – for my sins – I co-own/manage a small’ish commercial property? It’s true.
I didn’t buy it, I generously got lumbered with it after my old man retired a few years ago. He used to run a quaint little wholesale business from the gaff. Rather than flogging it, we collectively made the strategic decision to reap the rewards of long-term commercial rental leases. It was the right decision (for various reasons).
Sweet. So I officially became a “commercial landlord”. Interestingly, a rare strain of landlordism that isn’t notoriously vilified by the general public. Rock on.
I think it’s plausible to assume that many landlords have considered Residential Vs Commercial. I know I did before I became a participant. I often wondered if I was missing a trick by only focusing on residential BTLs. Ya’ know, because there’s nothing healthier than a diversified portfolio.
There is.
And it turns out that the only trick I was missing was an ungodly fast paced rate of losing my money and my sanity.
Even though I have limited experience and exposure (that’s literally the only silver-lining here), I can tell you with certainty that short of someone sticking a shotgun to my cranium (and even then I’d put up a good fight), I would never dip into my own pocket and consciously buy a commercial property solely for investment purposes. I’ve seen enough. It’s not for me.
Residential Buy-To-Lets reign supreme.
Despite its strong perks, commercial investments can suck my royal lordy balls. Hard.
This is my very short and personal experience with commercial lettings…
Why Commercial Property Investment/Lettings sucks
Business rates
You can literally scrap everything else on the list if you want, because the business rates con alone is the show stealer.
For those unaware, “business rates” is essentially the council tax equivalent for non-domestic premises (e.g. shops, offices, pubs, warehouses, factories), only it’s a ‘roided up-to-the-tits version in terms of cost.
I don’t know the intricacies of business rates, specifically how local boroughs impose their fees on varying businesses and premises, but I can certainly tell you how it crucified my finances, Game of Thrones style – head wallet on a spike!
Similarly to council tax, landlords are obligated to cough up the doe even during vacant periods (with very few exemptions).
You already know where this is going, right?
My commercial property falls within London Borough of Enfield’s jurisdiction, and their rate for my particular property is £2500’ish PER MONTH! Once again, we’re NOT talking about a lavish skyscraper planted on prime real estate, it’s closer to a portable toilet cubicle made out of tin in the arse end of nowhere.
Timing is also relevant to my woes. My dad retired and closed his wholesale business a few months prior to an inconspicuous bat, located in a wet market on the other side of the planet, allegedly deciding to grind its axe against the human population.
Do you know how many companies were looking for commercial premises during the pandemic?
The property ended up being vacant for several months (may as well have been a lifetime), and by the time we managed to secure tenants we had racked up a gut-wrenching £25,000 bill.
Queue hyperventilation.
My dad had been operating his business out of the building since the early 90’s and never failed to pay the rates. On time, every time.
So this felt like a kick in the teeth, and completely unjust considering the circumstances. I can’t even begin to understand what we were paying for during that time; the entire country was on lockdown and the warehouse is tucked away in the corner of an industrial estate that seemingly wasn’t benefiting from any services.
Being a true optimist and fantasist, I presented my case to the local council and reached out to one of Enfield’s Councillors’, grovelling like a baby, hoping for some support and relief.
Long story short: we received a lot of empathy and well wishes… followed by the bill (and an emphasis on potential legal proceedings if payment is not made).
“FUUUUUUUUCKKKKK! SHHHHEEEEEEETTT! FUUUUUUUUCKKKKK!”
I couldn’t help but be haunted by the thoughts of the property remaining vacant for even longer. Literally terrifying. This business venture could have liquidated me quicker than a bad poker hand at an underground casino run by the Russian Mafia.
My mind was made. Business rates make commercial lettings too high-risk, and quite frankly, repulsive. At least council tax is relatively manageable during vacant periods, business rates seem to be so out of whack from reality.
Declining need for commercial premises
So, do you know why I feel safe with residential lets? Because the basic human requirement for shelter has not changed, and moreover, there has been no fundamental shift in how we live.
That can’t be said about consumer behaviour, which has drastically shifted in a very short period of time due to the internet, directly impacting how businesses operate.
I genuinely believe I can make reasonable arguments for how every type of commercial property other than those suitable for storage (e.g. warehouses, depots) can be slowly (or quickly) phased out or drastically starved of demand.
Will it happen? It’s happening. I just don’t know how far it will go. High-streets are dying in front of our very eyes because of the online economy, making shopfronts an unnecessary expense for many businesses.
Yes, the pandemic killed demand and prolonged vacancy periods at the time, but it also helped accelerate the rate at which businesses lean into digital and remote solutions, which has resulted in an even larger decline in demand for commercial premises.
Filling vacant commercial properties was already difficult enough, but now it feels like a death sentence.
This ship is sinking like the Titanic.
Influencers peddling commercial property investments
Do you know what really spurred me into blogging about this? A YouTube property influencer/advert.
To be fair, I would have thrown this hissy fit regardless, but this guy certainly poured fuel to the fire.
If you frequently consume property and investment related content online like I do, then you might also get stalked on YouTube by excruciatingly painful finance/investment related adverts (that is, if you’re also too cheap to splash out on a YouTube Premium subscription – it’s an ad-free utopia, I hear).
A year or so ago (maybe longer), I remember being firmly stuck in the crosshairs of a particular advert, featuring a glossy used-car salesman, swearing blind that commercial lettings are a neglected gem, with considerably more upside and ease than residential lettings. All I had to do was enrol into his online course to find out how and why.
No kidding, aye?
I must have crossed paths with the soul-destroying advert one zillion times.
The timing was hilarious, because at the time I was on the verge of throwing myself off a balcony, onto a cactus, because I was in the midst of grappling with the pitfalls of commercial lettings. So I knew he was selling snake-oil.
I’ve never forgotten about that guy’s shill, and I knew one day his ploy would feature in this very blog post. This gripe has been resting in my core like a dormant pathogenic virus, and now it’s showtime, baby.
Do I think he was right and I was just having an unlucky experience? Shitting hell no. I think he was lying through his pearly white veneers and trying to capitalise on a market that is significantly less competitive than the residential “property guru” market. He wanted an angle, and commercial lettings was it. Although, I have noted that more and more influencers and experts are trying to cash in on this “niche”.
Funny enough, I haven’t seen my guy’s adverts in a while, but at some point after, I did see that he starting featuring in a new advert pushing good ol’ residential property courses.
Every fibre of my body wishes I was joking.
My guess is, the wheels quickly fell off his business venture when the world started moving in a completely different direction from the material on his presentation slides, with more and more businesses migrating to online services, hot-desking and embracing the working from home culture. So unless he wanted to be like the local Rolex sales rep in a destitute village in Sudan, he needed to pivot.
There’s no shame in that – we all have to move and shake with the times. But that doesn’t negate the fact he was peddling an illusion from the offset, because even though commercial lettings can be extremely profitable, I know from first-hand experience that it’s riddled with mediaeval torturing devices.
I have no qualms with anyone teaching or investing in commercial lettings. However, I do have a problem with influencers/mentors profiting off false claims.
In reality, it’s usually the same ol’ story with these property mentors – the irony is, most of them are making more cheddar from their junk courses than property itself.
My conclusion: Commercial properties are like marriages
During the good times marriage can be euphoric. They’ll give you everything you need, plus more (I’m not oblivious to the perks of commercial lettings, I assure you).
When they breakdown; you better watch out! It will come at you with a machete, swing for the jugular, and bleed you dry like a sacrificial lamb – making you quickly forget why you even agreed to this bullshit in the first place.
I’ve experienced the breakdown, and personally, the risks don’t seem worth it.
I know that when I’m eventually served with a notice to vacate from the leaseholder, my reaction will be Shakespearean; I’ll break down into tears, pass out, tumble onto my knees, and then as soon as I regain consciousness I’ll plead for mercy. I need them a lot more than they need me.
Living in such fear is no way to live.
Do you know what just struck me? That’s the biggest difference between Residential Vs Commercial lettings in 2023 (and probably beyond), the power balance between landlord and tenant is inverted.
Alas, me and my ol’ man are sticking to the plan and remaining commercial landlords. The building is mortgage-free, and it’s specifically designed for wholesale storage (which is unlikely to ever go out of fashion), but man, I wouldn’t actively invest in commercial property, not even below market value (because any savings can easily get swallowed alive by business rates).
Screw this commercial junk, I’m done with it (well, other than the one I’m stuck with until I can hand it down to my least favourite child).
To all my fellow successful commercial landlords out there, I’m not against you, I’m just not one of you.
Landlord out xo
Disclaimer: I'm just a landlord blogger; I'm 100% not qualified to give legal or financial advice. I'm a doofus. Any information I share is my unqualified opinion, and should never be construed as professional legal or financial advice. You should definitely get advice from a qualified professional for any legal or financial matters. For more information, please read my full disclaimer.
Landlord. I enjoy your regular blogs and have read them for many years but Wow, I've never seen such a negative reaction to commercial property. I appreciate you've had a single negative experience, but can't help feel you've thrown the baby out with the bathwater. I've had a resi portfolio for over 20 years (and which I still have) and got into commercial about 5 years ago and my opinion is it is so much easier. No moaning tenants all the time, no late-night calls that there's a squirrel in the loft keeping the tenants’ kids awake, no complaints about damp because the tenant won't put their heating on etc. I bought my commercial properties with my private pension fund via a SSAS and with one being multi-tenant office based (fully occupied since day one) and another a full repairing and insured tenanted property, it has given me the best returns ever and I pay no tax on my increasing value and profits! I think it's important to always to have a plan B (especially with commercial) so that if a commercial lease does not work out, can you convert it to resi, or convert it for another customers use? Can you reconfigure the building to change if from only one tenant to multi-tenant? You defo need to be more adaptable with commercial property than resi, but if you get it right the rewards can be amazing. And right now, the government is not going after commercial landlords so that's a massive incentive for me. Keep up the good work and the rants which I always enjoy. Rich