Buying your own commercial property

Buying your own commercial property

Author
Discussion

lexi 1

Original Poster:

87 posts

151 months

Saturday 17th February 2018
quotequote all
Am thinking of buying my own unit as I am fed up paying rent but think I am going to need an investor as I don't think I can raise enough funds on my own back I have a good profit making business but need some advise from some one that's actually done it ?

Can anyone help me

Insurancejon

4,054 posts

245 months

Saturday 17th February 2018
quotequote all
typical banks want a 30-40% deposit for commercial mortgages, but there is sometimes help with the deposit via BEF and other govt grants.

I have a mortgage broker who is good at packaging commercial mortgages and grants together

NB - normally from a tax and security perspective you would buy the property yourself and rent it to the business, however if you are raising grants it will have to be owned by the business

Dick Dastardly

8,312 posts

262 months

Saturday 17th February 2018
quotequote all
LTV can go a fair bit higher than that. I got 75% on a commercial mortgage with Barclays about 7 years ago and the same again with HSBC 4 years ago. Both were bought personally but for my main business to rent.

Off the top of my head they were something like 3% over Bank of England base rate. Both times it meant that monthly mortgage repayments were about half of what rent would have been, so if you can afford it then it makes a lot of sense.

Jockman

17,912 posts

159 months

Saturday 17th February 2018
quotequote all
Do you have a pension vehicle that can do this?

lexi 1

Original Poster:

87 posts

151 months

Saturday 17th February 2018
quotequote all
Jockman said:
Do you have a pension vehicle that can do this?
I do have a pension how does it work ?

surveyor

17,767 posts

183 months

Saturday 17th February 2018
quotequote all
lexi 1 said:
Jockman said:
Do you have a pension vehicle that can do this?
I do have a pension how does it work ?
You buy the property through a SIIPP provider who then administer the pension pot - https://www.pruadviser.co.uk/pdf/FRPB10006.pdf

There are tax advantages but there are also downsides too. If your business is the tenant you would have to deal with the Pension Administrator much like any landlord - but often they are very risk averse. If for instance you want to defer a rent review because the increase would be too high - you would not have the option...


Jockman

17,912 posts

159 months

Sunday 18th February 2018
quotequote all
lexi 1 said:
Jockman said:
Do you have a pension vehicle that can do this?
I do have a pension how does it work ?
Is cashflow good? Is your pension pot large enough to fund the purchase or can you make use of pension carry forward?

Jockman

17,912 posts

159 months

Sunday 18th February 2018
quotequote all
surveyor said:
You buy the property through a SIIPP provider who then administer the pension pot - https://www.pruadviser.co.uk/pdf/FRPB10006.pdf

There are tax advantages but there are also downsides too. If your business is the tenant you would have to deal with the Pension Administrator much like any landlord - but often they are very risk averse. If for instance you want to defer a rent review because the increase would be too high - you would not have the option...
Yes, approach with eyes wide open. The Lease will determine the rent review points (generally five years) but remember any increase is essentially to yourself as you are the Tenant and the SIPP owner.

Rent is a return on investment so does not effect your annual allowance.

lexi 1

Original Poster:

87 posts

151 months

Sunday 18th February 2018
quotequote all
surveyor said:
You buy the property through a SIIPP provider who then administer the pension pot - https://www.pruadviser.co.uk/pdf/FRPB10006.pdf

There are tax advantages but there are also downsides too. If your business is the tenant you would have to deal with the Pension Administrator much like any landlord - but often they are very risk averse. If for instance you want to defer a rent review because the increase would be too high - you would not have the option...
Thank you for the detailed reply I do have a pension I have paid into for years I need to find out how much is in it !

Will go and see my accountant's and go from there

lexi 1

Original Poster:

87 posts

151 months

Sunday 18th February 2018
quotequote all
Jockman said:
Is cashflow good? Is your pension pot large enough to fund the purchase or can you make use of pension carry forward?
Cash flow in the business is very good we are never delayed for money from any clients luckily !

Pension will be no where near big enough to cover the purchase (most property I am looking at are around 450k to a million

the only other route would be to buy a suitable bit of land and build what I want

olivebrown

137 posts

109 months

Sunday 18th February 2018
quotequote all
You can borrow up to 50% prop value through Pen Co, I believe.

Jockman

17,912 posts

159 months

Sunday 18th February 2018
quotequote all
lexi 1 said:
Jockman said:
Is cashflow good? Is your pension pot large enough to fund the purchase or can you make use of pension carry forward?
Cash flow in the business is very good we are never delayed for money from any clients luckily !

Pension will be no where near big enough to cover the purchase (most property I am looking at are around 450k to a million

the only other route would be to buy a suitable bit of land and build what I want
You potentially have available an allowance of £160k for pension contributions (minus any contributions already made in the last 3 years).

Would this help?

HoHoHo

14,979 posts

249 months

Sunday 18th February 2018
quotequote all
I can’t advise either way about using your pension but I bought mine 10 years ago and it was the best decision I made yes

I now own a mini-trading estate with three buildings producing a nice little income.

I do remember I bought mine using my pension but pretty quickly took it out and the buildings are now owned by myself.

Bear in mind that all income (rent) is taxable regardless of the mortgage payment however you will get tax relief against interest paid. My mortgage which only has 18 months left is 1% above base which was pretty good at the time and I only needed 10% LTV which of course is probably unheard of now!

matjk

1,101 posts

139 months

Monday 19th February 2018
quotequote all
Have you found any suitable property’s , speaking to an EA in our area the other day and she said Free Hold commercial is like hens teeth at the moment with nothing on the market ! It’s a sellers market , I think thats because the yields are excellent so no one want to sell

matjk

1,101 posts

139 months

Monday 19th February 2018
quotequote all
And to add we brought our property in 2009 , great decision, we moved again in 2016 to a bigger place , my only regret is we sold the first, that was silly, we sold an 1100 sqr fr and got a 4100 sqr ft for a mere £20k more practicaly next door . We just went mortgage route with HSBC

MrC986

3,481 posts

190 months

Tuesday 20th February 2018
quotequote all
Hi OP, some of the County Councils run a property register (via their Economic Development team or similar) on available property both for sale and to let which is a useful place to get an idea on availability. Unfortunately as has been said before, there's an acute shortage of freehold property which is in turn driving values up significantly across large parts of the main areas of the U.K.

Given the strength of the freehold market, you're best to be contacting commercial agents directly and getting your details on their database for when something might come along - there are instances when property of this nature sells before a board even gets put up, or a listing on the Internet.

Edited by MrC986 on Tuesday 20th February 19:44

olivebrown

137 posts

109 months

Tuesday 20th February 2018
quotequote all
Alot of commercial property is being sold through auctions.

Check the catalogues of Acuitus, Lamber Smith Hampton, Allsop etc.

Although as mentioned, commercial is very much at a premuim with people utilising their SIPPs.

MrC986

3,481 posts

190 months

Tuesday 20th February 2018
quotequote all
olivebrown said:
Alot of commercial property is being sold through auctions.

Check the catalogues of Acuitus, Lamber Smith Hampton, Allsop etc.

Although as mentioned, commercial is very much at a premuim with people utilising their SIPPs.
I'd suggest you don't try and buy at auction using a SIPP as they timescales are likely to be too onerous given the additional level of checks the SIPP trustees will impose.