Pitfalls of Becoming a Commercial+Residential Landlord

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    Pitfalls of Becoming a Commercial+Residential Landlord

    I am seeking some advice from the vast pool of experience on this forum please. We have seen an opportunity to buy a shop with flat above in a nice town and having crunched some numbers, there appears to be a surplus of £900/month (we would extend the mortgage on our house to raise a good deposit, borrow the rest of the purchase on a BTL and with interest rates where they are currently, it would not increase our domestic mortgage repayments) from the rental income (shop already let and the figures for the flat are based on previously achieved market figures). This surplus could presumably be used to build up a buffer to mitigate any void periods. All of the financing figures are based on fixing for 5 years to give us stability - we have one full time salary coming in and I run a small business with a modest income.

    The question is - am I missing any major factor that makes this not as attractive a proposition as it first seems? It is a nice town with reasonable local trade. The building is very old which could throw up some repair issues I guess but it looks fairly well looked after. The company currently letting the shop could develop financial problems and disappear but I would want to find out more about the lease that they have and what their commitments are (although if they went bust I guess generally that any debt would be a loss). There is another larger vacant shop just down the road that has recently been put on the market but generally the town seems good without too many vacant shopfronts - it also has a good tourist season. Maybe mortgage companies don't like do BTL on a mixed type of property?

    Any thoughts would be much appreciated.

    #2
    Can you afford to pay business rates on an empty shop for years on end?

    Then I wouldn't touch commercial property any more.

    Comment


      #3
      Originally posted by JK0 View Post
      Can you afford to pay business rates on an empty shop for years on end?

      Then I wouldn't touch commercial property any more.
      In my experience, vacant commercial space will let if the landlord is prepared to be really competitive with the terms on offer. However if owned with a bank loan the lender would have to consent to a new letting and they are notoriously uncommercial in their approach as well as being desparately slow in considering any request even if properly made under the terms of their charge. Hence, pick your lender carefully. This is a relatively new concept called peer to peer lending, which is actually reproducing fairly closely how building societies started two hundred or so years ago and this might work for you. I've never participated as a lender or borrower (Polonius would be pleased!) but heard good things. see for example this proposition https://www.proplend.com/borrower/?g...3fhhoCiMzw_wcB
      Interest rates may prove to be higher than for purely residential loans; as the risk is higher.

      Comment


        #4
        Hi commercial mortgages are not the same as house or flats, expect to be charged 5.5% or more on a loan 75% LTV. Try Interbay funding. Is the tenant renting just the shop and is it on a Full repairing and insuring lease FRI? there might be a rent deposit held by the LL , also if it becomes vacant you could look at was to work it yourself until you find a new tenant.
        good luck whatever you do.

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