What counts as commercial investment property
Commercial investment property is any non-residential building bought to generate rental income from a business tenant, rather than to live in or trade from yourself. It includes shops, offices, warehouses, light industrial units, and other purpose-built commercial space.
How it differs from residential and semi-commercial buy-to-let
Residential buy-to-let is let to a household and is assessed mainly on achievable rent against the mortgage, using an industry-standard rental calculation. Commercial buy-to-let is assessed on business rent, tenant covenant strength and lease terms, and lenders tend to look more closely at the individual deal rather than applying a single standard test.
A semi-commercial property combines a commercial unit with residential accommodation, such as a flat above a shop. It is treated as its own category — see our semi-commercial mortgages page for more detail.
Property types: offices, retail, industrial, warehouses, other
- Offices — assessed partly on location, specification and the broader demand for office space locally
- Retail — footfall, location and the resilience of the trade typically matter
- Industrial and warehouse units — often valued on usability, access and eaves height for storage or logistics use
- Other specialist property — such as leisure or healthcare premises, which may need a more specialist lender
Tenant covenant strength
Lenders look closely at who is renting the property and their ability to keep paying rent over the lease term. A long-established business with a strong trading history and audited accounts is generally viewed more favourably than a new or unproven tenant, though lenders will still consider weaker covenants case by case.
Leases
Length and break clauses
A longer unexpired lease term, with no imminent break clause, generally supports lending more easily than a short or soon-breakable lease, because it reduces the risk of a void period during the mortgage term.
Rent reviews and rent-free periods
Upcoming rent reviews can affect future income, and any rent-free period already granted to the tenant will usually be reflected in how a lender treats the income in the early part of the loan.
Vacancy
If the property is currently empty, lenders will want to understand the letting strategy and may lend a lower proportion of the value, or ask for evidence of likely future demand.
How lenders test the rent: DSCR, ICR and net rent
Commercial lenders commonly compare rental income to the cost of servicing the loan, using a debt service coverage ratio (DSCR) or interest cover ratio (ICR). There is no single universal stress test used across the market — each lender sets its own requirement, which may vary with property type, lease strength and loan structure.
How commercial valuations work
A commercial valuation typically considers the achievable market rent, the yield that similar investment properties attract, and the physical condition and specification of the building. The valuer's report feeds directly into how much a lender is willing to advance.
Deposit and LTV
Lenders set their own maximum loan-to-value for commercial investment property, and this varies with property type, tenant strength and your experience as a landlord. A larger deposit or equity contribution generally widens the range of lenders willing to consider the case.
Owning personally, in a company or through an SPV, with no tax advice
Commercial investment property can be bought personally, through a limited company, or via a special purpose vehicle (SPV). Each structure affects how lenders assess the deal and has different tax consequences. We are not tax advisers, and different tax treatment may apply — take independent tax advice before deciding how to structure ownership.
Risks
Commercial property values and rents can be more volatile than residential, void periods can run longer, and a tenant's business can fail. Your property may be repossessed if you do not keep up repayments on a mortgage secured on it, so it is important to plan for periods without rental income.
Investment checklist
- Understand the tenant's business and trading history
- Review the full lease, including break clauses and rent reviews
- Check the condition and specification of the building
- Have a plan for any void period
- Confirm your deposit and how you'll structure ownership
- Factor in all costs, not just the interest rate — see our rates and costs page
Who provides the advice and how it is paid for
Commercial Services are referred to a third party. Neither The Mortgage Genie nor PRIMIS are responsible for the service received.
The Mortgage Genie does not provide commercial mortgage advice. Our team will discuss your requirements and, where appropriate, identify a suitable partner adviser. We will explain who they are and obtain your permission before sharing your details.
We do not charge for commercial mortgage advice, because we do not provide it. The specialist will disclose its own fees and how it is paid before you decide whether to go ahead.