Thinking of buying a shop + flat as investment ?
Discussion
I'm looking at a shop with a self contained flat above which is for sale (auction) freehold.
I think the rent on the flat could cover the cost of the mortgage on the whole thing.
I am led to believe that even though the shop might be empty rates will still be payable, is this right and is there any way to avoid this, other than having a tenant in the shop.
I think i could aim to rent the shop quite cheap to ensure getting a tenant as quick as possible.
So i'm thinking, long term investment on the property and whatever the shop rents for being profit as the flat should cover the initial purchase.
Any downsides to this, it seems a bit too easy
I think the rent on the flat could cover the cost of the mortgage on the whole thing.
I am led to believe that even though the shop might be empty rates will still be payable, is this right and is there any way to avoid this, other than having a tenant in the shop.
I think i could aim to rent the shop quite cheap to ensure getting a tenant as quick as possible.
So i'm thinking, long term investment on the property and whatever the shop rents for being profit as the flat should cover the initial purchase.
Any downsides to this, it seems a bit too easy
Hi LC
I did this very thing back in 2001 where I purchased a shop with a flat above. The shop was vacant at the time which was actually a help for me as it allowed me too buy the property at a slightly lower amount.
Initially I could not find a tennant for the shop for the first year or so but the council do offer relief rates. IIRC there was 100% relief on the rates for the first three months and after that it reduced to 50% relief. Just after a year I found a tennant for the shop and he has been with us ever since. Im not entirely sure but I belive the amount of relief on vacant commercial proeprties has now changed and am sure someone more qualified could guide you.
As for the actual investments it was one of the best things I have done and would love to do it again. Essentially I was lucky and bought at a good price and was able to pick up the property for pretty much the same price as a three bed semi would have cost. However in my case I receive the same amount of rent just for renting out the flat portion as I would have from a regualar house. In addition once I had rented out the shop portion this was effectively doubling my income than what I would have achieved from a regular investment house. The rent on the flat comfortably covered the monthly mortgage and the majority of the time I use the additional income from the shop to reduce my overall mortage term.
Of course a lot of this depends on location on how easy it is to rent out, the initial cost of the property etc so a little research would not go amiss. Have a look at similar type of properties nearby and see if those shops are vacant or not.
I did this very thing back in 2001 where I purchased a shop with a flat above. The shop was vacant at the time which was actually a help for me as it allowed me too buy the property at a slightly lower amount.
Initially I could not find a tennant for the shop for the first year or so but the council do offer relief rates. IIRC there was 100% relief on the rates for the first three months and after that it reduced to 50% relief. Just after a year I found a tennant for the shop and he has been with us ever since. Im not entirely sure but I belive the amount of relief on vacant commercial proeprties has now changed and am sure someone more qualified could guide you.
As for the actual investments it was one of the best things I have done and would love to do it again. Essentially I was lucky and bought at a good price and was able to pick up the property for pretty much the same price as a three bed semi would have cost. However in my case I receive the same amount of rent just for renting out the flat portion as I would have from a regualar house. In addition once I had rented out the shop portion this was effectively doubling my income than what I would have achieved from a regular investment house. The rent on the flat comfortably covered the monthly mortgage and the majority of the time I use the additional income from the shop to reduce my overall mortage term.
Of course a lot of this depends on location on how easy it is to rent out, the initial cost of the property etc so a little research would not go amiss. Have a look at similar type of properties nearby and see if those shops are vacant or not.
Business rate rules have changed since 2001. Shops are entitled to 100% relief for 3 months only after they become vacant. Once the 3 months is up then full business rates become payable as if the shop is occupied. However for 2009/10 the government have decided that if the Rateablbe is £14,999 or below then no rates will be payable if the property is empty.
The 2010 Rating Revaluation comes in to force on 1 April 2010 and the government have decided that for 2010/11 only if the RV is below £17,999 no rates will be payable if the property is empty. In theory this offer will be withdrawn for 2011/12 and full rates will become payable on empty property (with few exceptions) and as there is no election in 2011 it is possibly arguable there will be no need to continue the special offer for properties with a RV of £17,999 or below.
If the RV is above these limits then the empty rates period will only be reset if the property is occupied for more than 6 weeks, although its relatively easy to "occupy" it.
The 2010 Rating Revaluation comes in to force on 1 April 2010 and the government have decided that for 2010/11 only if the RV is below £17,999 no rates will be payable if the property is empty. In theory this offer will be withdrawn for 2011/12 and full rates will become payable on empty property (with few exceptions) and as there is no election in 2011 it is possibly arguable there will be no need to continue the special offer for properties with a RV of £17,999 or below.
If the RV is above these limits then the empty rates period will only be reset if the property is occupied for more than 6 weeks, although its relatively easy to "occupy" it.
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