We have seen a pick-up in enquiries from residential landlords looking to move into commercial investment, with a particular increase in those looking to purchase a semi commercial property e.g. shop with flats above. In my opinion, there are two strong reasons for this activity...
Firstly, commercial property (including semi-commercial property or mixed use as it is also known) is exempt from the 3% stamp duty surcharge that landlords and home-owners face when making additional residential acquisitions.
To give an example; if you bought a residential property for £400,000 you would pay £22,000 in stamp duty if you own another residential property already. If you bought a semi-commercial property valued at £400,000 you would pay £9,500, regardless of whether you own another property or not.
The second reason is yield. Semi-commercial properties tend to produce higher yields than vanilla buy to let. According to our latest Buy to Let Index (page 12 & 13) semi-commercial consistently produces higher yields – not dipping below 6.3% in the past year. Vanilla buy to let property on the other hand has not managed to break the 6% barrier in the same time period.
Obtaining finance for semi-commercial property is relatively straightforward, as long as you either have experience in letting residential property, own an existing commercial property or are a high net worth individual. Rates tend to start from around 2.75% over Bank Rate on a capital and interest repayment basis.
Interest only terms are available from the challenger banks and tend to sit at around 4.50% over Bank Rate. We have two lenders in the marketplace which will consider up to 80% loan to value on these applications.
Tenants purchasing freeholds
Moving onto the commercial owner-occupier space, we have noticed tenants of existing trading businesses are increasingly being given the opportunity to acquire the freehold of the property.
For example, we recently helped a client purchase the freehold of a Grade II listed pub where he worked as manager and chef. Owner-occupier rates are available from 2.2% over Bank Rate with terms ranging from 15 to 25 years. Whilst each lender has its own preferences, there is appetite out there to lend to a variety of industry sectors to both investors and business-owners.
Your ‘one stop shop’ for commercial finance
Between us, on the commercial desk, we have more than 100 years’ experience in the commercial lending market across a multitude of industries. Our expertise doesn’t go unrecognised and I am pleased to tell you that I am a finalist in this year’s British Specialist Lending Awards, hoping to win the title of Commercial Finance Broker of the Year – fingers crossed!
We can arrange business mortgages, commercial investment mortgages, bridging, refurbishment and development finance, second charge and equity loans. Please do take a moment to read through our latest case studies to see how we have helped property investors and business owners recently.
We have been trading since 1990 and there are not many other brokerages with as many key contacts! So, if you do have any questions please get in touch on 0345 345 6788, or email me directly on firstname.lastname@example.org
Finally, I would like to take this opportunity to bid farewell to one of our team members – Richard Winston who is leaving us to join Hampshire Trust Bank. If Richard is your contact at Mortgages for Business, one of us on the commercial desk will be in touch to take over from where he left off.
17th April 2018