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  • Property-a-holics

    Commercial / Resi lending

    Hi guys,

    I have been looking at some existing business premises to buy, and many of them have accommodation above. I am attracted by the possibility of separating titles and extracting value, given that I actually want to use the commercial premises for a small business (or two). I have no idea where to start with lending. It is 30 years since I had a UK business premise.

    Can anyone advise about the best approach to lending, given that it would be my intent to conduct light refurbishment and separate titles of commercial and of residential flat above?
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    There's probably a mortgage broker hear or two that dapple in commercial brokering - I know 1-2 if you're struggling.

    The cheapest are normally your own bank but you'll need to jump through quite a few hoops and right biz plan with projected profit and loss, cash flow accounts/spreadsheets.

    RBS Natwest or lloyds had the best reputation a few yrs ago when I helped a few clients right business plans to get funding.

    The best strategy would be to buy a freehold create two leases and organise separate finance on each of the leases one resi one commercial.

    You should be able to do well out of this as many commercials are sold cheap if there's no commercial tenant especially at auction. Another way is to take over a shop where they are paying low rent but you can evict with a break clause or they're willinging to leave with a small pay off - especially if the shop reduces value of the resi above like Late license or laundrette etc the shop standard lending on resi upstairs thus reducing resi value by circa 20-30%. You sort this by changing the shop downstairs and suddenly your resi above is now 20-30% more valuable too.

    Regards Andrew.
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    regards Andrew Peers - property investor / sourcer - 07912674181

    a.peers@seamlessproperty.co.uk

    Property Redress Scheme Number 011436     NLA member 174404


    Andy,
    Thanks for your response. You have immediately added value to my proposition. We have personal business colleagues who wish to set up business, but are afraid of capital spending on fittings and fixtures without security of tenure. Our company can obtain the commercial mortgage funding without problems from our main UK bank. If I am to understand correctly, I think what you are suggesting is that our company (or ourselves if there are positive pension implications) obtain ownership of the freehold, then our solicitor writes up two separate head leases for which separate (one residential and one commercial) leasehold ownership can be obtained and thereafter mortgages can be obtained on the flat and the ground floor business premises. I just have to think around which "entity" does what from the beginning so we don't end up leasing from ourselves. At a stretch, we could fork out the cash for the initial procurement of the business, then apply for mortgages on both after title separation. The immediate goal that springs to mind is to determine if value uplift can achieve a "no money in" end result.
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    I'm sure it's possible - depends on how good your clients are and their new lease also of course Howe well you buy. I can keep my eyes and ears open if I know the approx area, budget and size of commercial unit needed.

    Regards Andrew
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    regards Andrew Peers - property investor / sourcer - 07912674181

    a.peers@seamlessproperty.co.uk

    Property Redress Scheme Number 011436     NLA member 174404

    You may also want to consider using pension funds to make the commercial acquisition.

    As an example, you could take funds from previous schemes into a SSAS and top them up from cash (the cash you mentioned using to part fund the purchase) using up previous years unused pension allowances if applicable. The top up would attract tax relief.

    Then use the fund to purchase the premises, paying a commercial rent for your (and others) use of the unit back into the fund to grow the fund tax free.

    Professional advice etc etc is needed but just food for thought.....
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