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  • Commercial Property

    Buying a commercial property via a SIPP.

    I've got a pension of approx. £125,000.

    I'm looking to invest this in commercial property.

    Anybody gone through this process and have any recommendations/tips?

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    I've tried this and it didn't go well. I was told that very few SIPP managers will invest in property except for the vanilla buying the premises that you use yourself. I went to one of the few firms identified as being prepared to invest in property and tried to buy an opportunity that I sourced myself. I was intending to take commercial and convert to residential, which can be funded by SIPP until the property becomes habitable. The managers were awkward, insisting on a gamut of professional reports which I considered an unnecessary expense, and putting up such a delay that the purchase fell through. So far all the fund has achieved is paying the manager's substantial fees. 

    Being more positive about things there was a time when Kevin Wright ran a company lumping SIPPS into projects for commercial/residential conversion, if this is of interest to you it would be worth talking to him, I'll point him at this thread.

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    Who did you use as your SIPP provider?

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    As I'm slagging them off I'd better not say.

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    Nick,

    If you could share it would be appreciated. It would help other members going through the same hassle you did.



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    I bought my first commercial property with my SIPP in 2014 (A1 shop) and my second one, with a bit of mortgage (arranged by me, but taken by my SIPP), in 2016 (B1 office).

    It did worked extremely well for me, my SIPP provider is AJ Bell, extremely responsive and professional.

    It is true, that taken in consideration the SIPP procedure, it is taking much longer than a purchase outside the SIPP, either personal or via SPV, but it is worth the extra effort etc etc

    The mortgage is going to be repaid already by end of 2017, hence two asset mortgage free, and in 2018 I do hope with max leverage authorised by the SIPP to buy the 3rd one.

    With your £ 120K of cash, your SIPP can borrow max another 60K.

    There will be a bit of learning curve but it is great way to build a commercial portfolio, and your SIPP can even have VAT if property is eligible/subject, anyway income/rent go tax free into your SIPP/pot and given high yield of commercial it is a great way to build up a portfolio/true pension that way.

    I am the appointed "property manager" by the SIPP and I issue invoice in SIPP name every 3 months to tenant, I look after insurance renew, service charge, contract renewal etc and I keep SIPP informed/copy.

    Great great instrument!

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    Thanks LondonSW. Really useful post  You've given me a boost  Nice to see someone has done this before successfully

    Can I ask a few questions.

    1) Did you use a broker to get the mortgage? If so could you post their details or PM me. If you went direct to lender let me know. I'm looking to finance and would appreciate a recommendation

    2) The property I'm looking at is not tenanted. Does this cause an issue as far as your aware? I'm guessing it will. 

    3) What's the typical timeline to exchange/completion? I have a site I'm considering and the owner has requested exchange within 6 weeks and a completion within 12 weeks

    4) How long does it take to move your existing pension to the new SIPP provider? I'll start this process now if it takes some time



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    First purchase was cash - second one with mortgage, and talking with the SIPP property team, they suggested me to go directly without a broker to an high street bank, saying they could not advise me which one etc but they had mortgage with all high street.

    It turned very problematic because since the mortgage was only £ 40K I got assigned just gradated or very junior and they did have no clue that a SIPP is not an individual or a Limited, and they asked a number of document not due, and overcomplicated the whole process, but I guess (and SIPP provider confirmed) I have been sort of unlike to end up to inexperienced people on a high street bank.

    I do not know what to suggest, a broker could be a way if he really did other SIPP mortgage and has a proven channel within a large high street bank.

    In case of non tenanted property, my SIPP was requiring fund in excess to bear two year of not tenanted property, meaning money to cover Business rate (you got 3 moths exemption if vacant), service charge etc etc but the problem could be the lender that required a tenant I guess, and would check also the financial position of your tenant, being his indirect risk. So it need to be weighted well.

    It may take extra time compared to a "normal" commercial property acquisition, since the solicitor has extra check and duty to fulfil the SIPP requirements, and the same the Surveyor (you can buy at the price/amount the surveyor state, not more not less), but in both case I did exchanged/completed the same day, because when you are ready you are ready and no need to exchanged first and then complete.

    So 3 months could be ok to exchange/complete the same day, but depending on the complexity of the deal and how everyone respond you may need extra time - but all deal require extra time for a reason or another.

    Pension to SIPP? It can require easily 1-2 months. Usually the SIPP would required you to be advised by a IFA, so you need to book an appointment with a IFA, then open the SIPP account, then instruct (via IFA) your actual pension to transfer to you SIPP etc and again depending on how responsive is everyone it can take easily few weeks.

    Do not get scared, one step after the other and you would be doing everything.

    ps: in my second purchase, the B1 office was part of a premises/freehold with a residential maisonette above (sold off in long lease) and a lower ground floor flat residential again sold off in long lease. Basically the entiry freehold was for sale, BUT the SIPP would allow you to buy only the "pure" commercial, so I have had to buy the entiry property with a Limited, and then re-sell into the SIPP the 999y lease at peppercorn of the B1 office, and all done with surveyor stating the value of the entire freehold and the 999y B1. The B1 was costing 5K less then the entiry freehold, hence I bought with a limited and resold the 999y to my SIPP etc etc so bear in mind, "pure" commercial. 

    The first purchase was a 999y peppercorn of a A1, more straight fwd.




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    Thanks for another helpful post LondonSW. Really appreciated.

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    Do all SIPP providers support this or is it just some?

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    Only some SIPPs...you better check which one allow you to buy Commercial property.

    In my case my IFA suggested AJ Bell for a matter of costs, ability to buy commercial property (my main aim for the SIPP etc) etc

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