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I am looking at a high street freehold, retail unit tenanted 5 year lease, the building also has a flat above, separate entrance rented out on and AST, not leased, part of the freehold. Gross yield is good for this area in the south 10%. I can purchase outright through my Ltd. My question is how easy is it to mortgage later to release equity, I have other income ( employed full time HR tax payer) and a residential property which I live in
i don’t normally touch commercial mixed so wondering what the finance limitations are
any info would be much appreciated before I start DD
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
I can't offer any advice on mortgages but I have a little insight on mixed use and freehold flats.
I have purchased a mixed use property through my limited company and will eventually hold the leasehold to the flat in my personal name with the ltd being the freeholder which will include the commercial unit. This "normalises" the residential element ( I need to be an owner occupier and am not concerned with mortgage criteria).
I have recently viewed 3 freehold flats (not common*), none of which are mortgageable due to their legal status and potentially have a very good ROI. As far as I'm aware they could be "normalised" for lending purposes by creating a leasehold.
* The properties have been split into multiple units with the ground floor flat retained with the freehold and leaseholds created for the other units. I don't know why they have been created this way, as far as I'm aware it is usual to create a leasehold for each unit and a freehold for the building.
A commercial lender wont have any issue with this, perhaps start by speaking to your existing bank for a referral to their commercial team. with a first commercial deal they may only want to go to 60 or 65% LTV and the rate will be a little higher but both of these points are negotiable, especially the rate.
Stewardson Developments Ltd.
Burson Land Ltd. & Jennings & Gilchreaste Ltd.
Follow me on twitter - @philstewardson
Whilst the number of lenders offering mortgage products in this space is fewer than BTL residential, there are options and 70% LTV should be readily achievable. The rates are higher than for BTL, as the risk is perceived to be higher.
Stuart makes an interesting point regarding splitting the title. This would certainly work, but you would have to weigh up the additional costs of: paying a solicitor to split the title and put a long lease in place v. the higher interest rates applied to commercial mortgages. You could theoretically obtain 70% LTV as it is and, in my opinion, this is better done as a purchase than a remortgage (I'm sure some will disagree with this!).