Investors always have and always will be interested in exotic commercial property. It is something which jumps out to these investors as they can often be interesting proposals and commercial property can offer healthy returns on an investment.
However, these commercial property investors have be warned not to expect too much from commercial property investments, especially with the effect the current economic climate is having on the commercial property market.
Those investors who use commercial property as a self invested personal pension (SIPP) have been urged to be very cautious when looking into commercial property.
One thing which SIPP investors must be aware of is unrealistic valuations and multifaceted loan arrangements. David Baker, legal and technical director at SIPP provider, Wealthtime, said: ‘There are several things to look out for with property investments… The purchase should not be undervalued; it is perhaps more of a worry whether the property is worth as much as is being paid for it given some of the off-plan purchases gone sour recently, but that would not trigger a tax charge. The other possibility of a tax liability is if HMRC argues that the SIPP was trading but that would be a problem only if one were involved in one SIPP and there was a pattern of sale and purchases property.
Baker says there is no problem in putting down a deposit and getting interest on it, as long as the fee appears sensible within the context of the purchase price. However, Baker added, ‘the anticipated value on completion, which is presumably the incentive to invest, may or may not be realistic.’
A SIPP investment is incredible complicated and should not be looked into lightly, the more information available the better. However, should you have the available capital, a SIPP investment is something which can yield good returns for a minimum amount of work and is something that should definitely considered.
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