Investing in a commercial property

Investing in a commercial property is one of the great steps in a professional career and being so important, it is also one that takes some serious consideration. Many people come to the point where such an investment is of more a practicality than renting out a commercial property. In fact paying a hefty rent may be transformed into paying a regular chunk out of a bank loan on a property which will, eventually become all your own. This could be an investment that will pay dividends in the long run, probably even long after you decide to close your business and retire.  You may also be looking to invest in a commercial property as a rental investment which will also pay you dividends over time.

Certainly a key difference is in the way you finance your property purchase.  If you decide to take a bank loan you have to own a deposit amount which will be paid to the owner up front, apart from the monthly loan repayments which you will have to agree upon with the bank.  Traditionally, the deposit amount is that of 30% however this may be subject to your own affairs with the bank.  There is then the traditional system of paying key money to the owner of the property, which is especially the case if the commercial property is already equipped with shop fittings or equipment. Consider a typical example when you would be buying a boutique complete with shelving, mannequins, cash register, changing room furnishings and the lot.   Another case in point would be the purchase of a catering establishment which may come equipped with refrigeration units, ovens, display units, coffee machines and others. What this all boils down to is basically that you would be paying for the assets that come with the property.  Very often these items are included in the price when purchasing however one must look at all scenarios.

The commercial real estate market is presently experiencing a high level of traffic which goes with an economy that is thriving. Properties are generally found in all locations and do come in varied forms and sizes to suit a great selection of requirements. Therefore the first thing to do is check your own agenda to start approaching the optimal decision to take in a systematic way. Let’s have a look:

Type Of Business

Whether you are relocating your business or are a start up your first step will need to be the research of the types of licenses and permits required for your specific purpose.  These permits often tie in with the very character or location of the premises you seek and the type of insurances and safety specifications tied to it.


This will strongly be influenced by and impinge upon the nature of your business and your budget.  If you want to be based close to your residence to avoid commuting is one part of this decision. But you also have to consider whether you will be needing a location in the heart of town, on a high street, away from the crowds, close to an educational establishment such as a school, in a street with plenty of parking, in a street with plenty of foot traffic, etc. Some locations become a success simply by being on the right side of the road. You would be wise to also check the competition in the vicinity of the location you are considering. In Malta some towns get to be busier than others. Some are busy all day, others are only busy at specific times of day, say, around peak traffic time, or around school opening and closing time. Some locations are only busy seasonally, so if you are new to the location, you should research what happens at different times of the year or even week.

Size Of Premises

You may only require one room with a desk and a computer to run your business. Then again you may need space for client seating, a changing room or several changing rooms, a kitchen, outdoor seating for serving drinks the options are multiple. Again you have to check your business specifications based on permit requirements even at this early stage of your selection process. You might have to forgo a commercial property simply because you do not have space for a rest room fit to accommodate a disabled person with a wheelchair. If your premises should include a kitchen, there have to be health and safety regulations to attend to and these will also effect your ability to insure your commercial property correctly. Do also note that a bank loan may be refused on the basis of ill-suited premises.


Property which has already been up and running as a commercial activity similar to what you have in mind, might come equipped with all the necessary fittings and decor accessories. This might cause an increase in the asking price, but it might also mean that the premises already register for the necessary permits, thus eliminating the hassle of applying as a new business. Another plus is that you would have part of the furnishings in place from day one.

Get in touch with a property agent specialised in commercial properties and trash out these issues with him/her. That way you both will have a clearer idea of what is needed, how to go about it, what sorts of funds are required and move on to start making the right choices. The agent will be well versed in this segment on real estate, and lead you to the right contacts linked to permits, bank loans, insurance and other financing issues. Once you know where you are heading, the right assistance will make your commercial property purchase closer to becoming reality.

General Procedures And Costs

Once the immovable property has been selected and we have assisted you in negotiating the price as well as any special conditions duly negotiated and agreed upon an appointment is set to sign the Preliminary Agreement or what is commonly known as ‘Konvenju’. This is essentially an agreement binding both the purchaser and the vendor to conclude the transaction within an established date (term of Konvenju) subject to a set of conditions.On signing of the ‘Konvenju’ you will be required to pay 1% provisional stamp duty as part payment of the full 5% which the balance is due on signing of the final deed and an agreed deposit which is generally 10% in such circumstances. In the case of those purchasing their first immovable property, the stamp duty on the first €150,000 has been removed as a concession, and calculated at 5% on the remaining balance of the property.

During The ‘Term Of Konvenju’:

Notary Public carries out the necessary searches to verify legal title and to ensure that there are no outstanding debts, hypothecs or liens on the property Purchaser is to complete all the special requirements e.g. organise bank loan, check on building permits, etc. as agreed upon with seller and stipulated in the konvenju Vendor will complete all special requirements e.g. complete the building, or finishing certain works etc. as agreed upon with buyer and stipulated in the konvenju.

During this time we can be called upon to assist in any queries the client might have. We have very good relationships with all the leading banks on the island and can therefore also assist you as the client in setting up meetings with the bank of your choice.

Once all the above has been completed by all parties concerned a date is set for the actual signing of the Final Deed. The venue of the signing will be held at the local banks legal offices in the case that one may be obtaining finance or either at one of the RE/MAX offices or at the office of the Notary Public. The final deed is read and agreed upon and the balances due will be paid accordingly. Theses are; balance of the selling price to the vendor; the balance due to the Commissioner of Inland Revenue for stamp duty as well as 1% Notary fees to the Notary Public.

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