Buying Commercial Property Privately

RichCRX

Hi there,

Some commercial property has come to the market that myself and my wife are interested in purchasing, so I'm just looking for some advice / tips with regards to commercial investments.

1) Firstly, we're not a registered business looking to buy the premises, we're just looking to purchase the property privately. Is there usually any issues encountered when trying to purchase commercial property privately like this?

2) There is currently a tenant in the premises which we would be happy to continue to lease to in the short term (so I understand we will have to register the rental income from this for tax), with the plan to then set up our own business and run it from this property. This would require a change of use on the premises, so I assume it's to go to the local council for this?

3) We would require a loan of circa. 80-100k (about 60% LTV) to complete the purchase, so we were thinking of a personal loan type (instead of a mortgage). Do lenders typically tend to look for business plans for commercial property investments or would our PAYE / savings circumstances generally be enough to acquire the loan?

4) Any other tips / warnings when purchasing commercial property?

Any help is greatly appreciated. Thanks so much.

Richard.

antoinolachtnai

Is the tenant happy to leave? If they have a lease in place they have a right to stay.

RichCRX

It's advertised as "tenants unaffected" so not entirely sure what that means from a buyers perspective. Either way, I've enquired about the current rental agreement & terms in place but haven't heard back yet from the estate agent.

antoinolachtnai

RichCRX wrote: »

It's advertised as "tenants unaffected" so not entirely sure what that means from a buyers perspective. Either way, I've enquired about the current rental agreement & terms in place but haven't heard back yet from the estate agent.

In broad general terms it means that the tenants have rights.

If the objective is to get a vacant business premises this might not be the best option.

jetfiremuck

A good read of the lease being part of the due diligence is the most important item. If you are buying as a landlord then the details of renewals, rent increases, rates responsibilities as landlord, mgt fees etc will give you. Commercial leases are all different and are not the same as residential and the emotional baggage they bring. If the tenant is a good payer and with the economy like it is retail wise youd need to do your homework. Vat is another charge to be considered when purchasing and on the rent (returns to revenue).

Money wise its a question of how cheap you can get it, collateral required etc. Private might mean a lower down payment and better terms.

If you are happy go for it.

DubCount

There is no issue operating a commercial letting business as an individual. It may be worth checking out the VAT status of the building. VAT on commercial property can be complex depending on the circumstances. Get some advice on that.

I would expect the bank will want you to get a mortgage in stead of a personal loan. They will prefer the collateral. Besides, the interest rate should be a lot lower on a mortgage.

The value of a commercial property is significantly driven by the quality of the tenant and the terms of the lease. Its worth checking out the accounts of the tenant if you can.

RichCRX

Thanks alot for the heads up about understanding the lease in place thoroughly and to check VAT status. Appreciate it folks.