Advice on buying a business and freehold?
Discussion
Hi
We are looking at buying a well established retail business. No problems here- strong track record & well priced. We can raise funds by re-mortgaging our home. We can also buy the freehold for the shop. Price circa 250k. Would it be fairly straightforward to get a commercial mortgage on this ? Could the mortgage be based on the income from the business (many years of accounts available)?
Any help much appreciated
Cheers
Simon
We are looking at buying a well established retail business. No problems here- strong track record & well priced. We can raise funds by re-mortgaging our home. We can also buy the freehold for the shop. Price circa 250k. Would it be fairly straightforward to get a commercial mortgage on this ? Could the mortgage be based on the income from the business (many years of accounts available)?
Any help much appreciated
Cheers
Simon
mortgage is highly unlikely to be based on the incopme of the shop- i know it can be done but in 8 years of buying retail shops and freeholds i have never managed to get a bank to accept a valuation of the business. The value which the bank takes will be bricks and mortar and you will have to put 25% down for the commercial mortgage.
Think very carefully how you set up the business. I would very very strongly suggest you talk to an accountant about setting up a ltd Co to run the business which holds a 999yr lease from you as the landlord- the Ltd Co can raise a mortgage on this which means you retain the underlying asset. If heaven forbid the business should fail it won't take you, or the asset with it, and you have rights to re-possess. whatever you do do NOT put yourself in the situation where the business going bust, and therefore you going bankrupt, will cause you to lose your house and the freehold on the business.
Think very carefully how you set up the business. I would very very strongly suggest you talk to an accountant about setting up a ltd Co to run the business which holds a 999yr lease from you as the landlord- the Ltd Co can raise a mortgage on this which means you retain the underlying asset. If heaven forbid the business should fail it won't take you, or the asset with it, and you have rights to re-possess. whatever you do do NOT put yourself in the situation where the business going bust, and therefore you going bankrupt, will cause you to lose your house and the freehold on the business.
pugwash4x4 said:
mortgage is highly unlikely to be based on the incopme of the shop- i know it can be done but in 8 years of buying retail shops and freeholds i have never managed to get a bank to accept a valuation of the business. The value which the bank takes will be bricks and mortar and you will have to put 25% down for the commercial mortgage.
Think very carefully how you set up the business. I would very very strongly suggest you talk to an accountant about setting up a ltd Co to run the business which holds a 999yr lease from you as the landlord- the Ltd Co can raise a mortgage on this which means you retain the underlying asset. If heaven forbid the business should fail it won't take you, or the asset with it, and you have rights to re-possess. whatever you do do NOT put yourself in the situation where the business going bust, and therefore you going bankrupt, will cause you to lose your house and the freehold on the business.
Think very carefully how you set up the business. I would very very strongly suggest you talk to an accountant about setting up a ltd Co to run the business which holds a 999yr lease from you as the landlord- the Ltd Co can raise a mortgage on this which means you retain the underlying asset. If heaven forbid the business should fail it won't take you, or the asset with it, and you have rights to re-possess. whatever you do do NOT put yourself in the situation where the business going bust, and therefore you going bankrupt, will cause you to lose your house and the freehold on the business.
I'd second that. Set up a limited company
It should be straight forward getting a mortgage, particularly now that lenders are falling over themselves
to lend money.
Juat a thought - If you set up a SIP ( Self Invested Pension) that can own th eshop, and payments become pension contributions. You have to pay rest - of course - but it's going into your own pension fund and when you sell the freehold at a profit in a few years time, the profit goes into the fund too. Talk to an accountant who really understands pensions legislation!
I was renting my business property in 1987 paying around £20 pw rent at that time......
Had the option to buy for £18,500,(it was undervalued) so did so taking out £16,000 mortgage...
Paid that off in four and a half years...
Property now worth well in excess of £400,000 due to town centre re-development in the area.....
If still having to pay rent now would have to stump up around £1500 pm at least....
So, in my case, buying freehold has been a very good investment, but obviously all circumstances vary......
Had the option to buy for £18,500,(it was undervalued) so did so taking out £16,000 mortgage...
Paid that off in four and a half years...
Property now worth well in excess of £400,000 due to town centre re-development in the area.....
If still having to pay rent now would have to stump up around £1500 pm at least....
So, in my case, buying freehold has been a very good investment, but obviously all circumstances vary......
Gassing Station | Business | Top of Page | What's New | My Stuff