Commercial property,buy to let
Discussion
Is anyone here renting out commercial property ?
I'm thinking in terms of a small shop unit or offices or a workshop unit.
Residential seems to be a minefield these days and you hear so many reports of tenants trashing the property, I'd imagine that's less of a worry with commercial.
Anything I should be wary of ?
I understand the landlord is liable for business rates when the property is vacant,yes ?
I'm thinking in terms of a small shop unit or offices or a workshop unit.
Residential seems to be a minefield these days and you hear so many reports of tenants trashing the property, I'd imagine that's less of a worry with commercial.
Anything I should be wary of ?
I understand the landlord is liable for business rates when the property is vacant,yes ?
V8covin said:
Is anyone here renting out commercial property ?
I'm thinking in terms of a small shop unit or offices or a workshop unit.
Residential seems to be a minefield these days and you hear so many reports of tenants trashing the property, I'd imagine that's less of a worry with commercial.
Anything I should be wary of ?
I understand the landlord is liable for business rates when the property is vacant,yes ?
Yep I do. Done it for decades. All kinds. Currently keep a collection of retail units. I'm thinking in terms of a small shop unit or offices or a workshop unit.
Residential seems to be a minefield these days and you hear so many reports of tenants trashing the property, I'd imagine that's less of a worry with commercial.
Anything I should be wary of ?
I understand the landlord is liable for business rates when the property is vacant,yes ?
Recently managed to persuade the missus to allow me to relapse back to my buying addiction and am piling them up good style again. This week (Thurs) got outbid at auction by £1.5k for a dungeon of a 500sq ft shop in a tertiary trading street which actually went far higher than I really wanted to pay.
Residential is about as far from a minefield as it's ever been, but there's so many people clamouring for stock that it's taking full on practice of the black arts to get anything as easily as it once was.
Trashing's pretty rare these days in my world, but if you're going to have a procession of tenants rather than a nice embedded long termer you might find that tenant A's commercial fit out doesn't suit potential tenant B etc etc which leaves you with the issue of how easy it is to return your small retail shop back to the nice clean empty box that attracts new tenants easily.
In the world of small shop units there's not much to be wary of. Lawyers, perhaps. And Big Operators. You might think it would be just lovely to have Big Name food, bookie, anything else company as your tenant. It isn't. It's headache. And lawyers advising you to enter into sophisticated and complicated (and expensive) arrangements with ordinary unsophisticated tenants is another headache.
The management of a small shop unit is also very easy and undemanding, so it's not hard to get a decent agent to do it (basically next to nothing) for 5%+vat. if you want to do absolutely nothing yourself.
And yes you are liable for rates (and BI) when the thing's empty, but most small shops other than in the poshest locations should qualify for Small Business Rates Relief, so you rent it to your wife/child/dog/friend as a store when it's empty which, if you know what you're doing, it shouldn't be anyway or not for long at least.
My OH does. He inherited 2 commercial properties although he basically ran them for many many years as his mother didn’t have a clue (bless her). He ran them properly though and was looked after.
Both of them are fast food takeaways which is the same as his own business so he knows what he is doing and one of the more stable businesses in this pandemic. They are on a fully repairing lease which means the tenant does all the work and the only thing we do is arrange buildings insurance and charge it back.
Having said that, the roof needs serious amount of work so we are paying at least half of the final bill, probably more as we just don’t feel it is fair to leave the tenants with the costs and then he also has control of the workmanship.
He also owns a domestic rental and we currently have a long term tenant paying below market rates (we want them to stay). So for us, neither causes many headaches but although the commercial property has a large bill (c.£20k) due, overall it is a better return and potentially less tenant turnover.
Both of them are fast food takeaways which is the same as his own business so he knows what he is doing and one of the more stable businesses in this pandemic. They are on a fully repairing lease which means the tenant does all the work and the only thing we do is arrange buildings insurance and charge it back.
Having said that, the roof needs serious amount of work so we are paying at least half of the final bill, probably more as we just don’t feel it is fair to leave the tenants with the costs and then he also has control of the workmanship.
He also owns a domestic rental and we currently have a long term tenant paying below market rates (we want them to stay). So for us, neither causes many headaches but although the commercial property has a large bill (c.£20k) due, overall it is a better return and potentially less tenant turnover.
Groat said:
... so you rent it to your wife/child/dog/friend as a store when it's empty ...
OK, interesting.Care to elaborate?
Your 6 year leased tenant has just decided to leave at the end of the tenancy, you market the property for a new tenant.
During the meanwhile [/python], your wife/child/dog/friend somehow becomes a legal temporary tenant until your new prospective tenant has completed lease negotiations?
How is that done?
Who pays all the utilities and insurance?
What do you tell your new prospective tenant and his / her solicitors?
What do you tell your insurance company?
Genuinely interested, assuming that you're serious and it's all legal.
rfisher said:
OK, interesting.
Care to elaborate?
Your 6 year leased tenant has just decided to leave at the end of the tenancy, you market the property for a new tenant.
During the meanwhile [/python], your wife/child/dog/friend somehow becomes a legal temporary tenant until your new prospective tenant has completed lease negotiations?
How is that done?
Who pays all the utilities and insurance?
What do you tell your new prospective tenant and his / her solicitors?
What do you tell your insurance company?
Genuinely interested, assuming that you're serious and it's all legal.
The simplest way of explaining it is - Groat says you can occupy my SBR (small business rates) commercial property (on a flexible lease Care to elaborate?
Your 6 year leased tenant has just decided to leave at the end of the tenancy, you market the property for a new tenant.
During the meanwhile [/python], your wife/child/dog/friend somehow becomes a legal temporary tenant until your new prospective tenant has completed lease negotiations?
How is that done?
Who pays all the utilities and insurance?
What do you tell your new prospective tenant and his / her solicitors?
What do you tell your insurance company?
Genuinely interested, assuming that you're serious and it's all legal.
) FOC, then passes on YOUR details to the local council so YOU take on the rates liability. YOU then use Groats property (example - for storage) and vacate within 24 seconds of Groat saying he’s found a *paying* tenant. 
Phooey said:
The simplest way of explaining it is - Groat says you can occupy my SBR (small business rates) commercial property (on a flexible lease ) FOC, then passes on YOUR details to the local council so YOU take on the rates liability. YOU then use Groats property (example - for storage) and vacate within 24 seconds of Groat saying he’s found a *paying* tenant.
I haven't had an empty for years, but I was thinking about when I was using premises myself and adding another rates liability would either kill/reduce my SBR relief or substantially add to my own bill.) FOC, then passes on YOUR details to the local council so YOU take on the rates liability. YOU then use Groats property (example - for storage) and vacate within 24 seconds of Groat saying he’s found a *paying* tenant. These days I only have 3 units that aren't let to the same tenant who has a lease allowing subletting which is what she does. If any of the 3 were to come empty they'd be added to her list given she has an apparently endless appetite for subletting anything she can get hold of.
I have let out a mixture of residential and commercial property for years.
Generally income yields on commercial are higher but capital growth is generally lower.
I buy listed commercial properties where possible and they are exempt from empty rates, reduces the downside risk especially where they exceed small businesses rates limits which most decent retail properties will.
Not sure which is better, they are different.
Generally income yields on commercial are higher but capital growth is generally lower.
I buy listed commercial properties where possible and they are exempt from empty rates, reduces the downside risk especially where they exceed small businesses rates limits which most decent retail properties will.
Not sure which is better, they are different.
rfisher said:
Business rates is the problem, if your property is liable for them.
Round here (Glasgow) SBR relief is awarded on premises whose RV is up to £15k pa. There are countless premises eligible. The OP spoke of 'small shop unit'. Hard to imagine how posh a location it would have to be up here to NOT be eligible for the relief.Edited by Groat on Saturday 6th November 21:54
Out of curiosity, what are people doing around VAT on smaller units?
On the basis that you probably wouldn’t rent somewhere if you were below the VAT threshold, so tenants are likely to be VAT registered, I’d expect that most are opted in for VAT but it’d be good to hear from people in this market what they’re seeing.
(Main interest being smaller offices/workshops below the SBR threshold)
On the basis that you probably wouldn’t rent somewhere if you were below the VAT threshold, so tenants are likely to be VAT registered, I’d expect that most are opted in for VAT but it’d be good to hear from people in this market what they’re seeing.
(Main interest being smaller offices/workshops below the SBR threshold)
LooneyTunes said:
Out of curiosity, what are people doing around VAT on smaller units?
On the basis that you probably wouldn’t rent somewhere if you were below the VAT threshold, so tenants are likely to be VAT registered, I’d expect that most are opted in for VAT but it’d be good to hear from people in this market what they’re seeing.
(Main interest being smaller offices/workshops below the SBR threshold)
I would only opt to tax if a) I had to because it was already opted to tax or b) I was going to spend significant sums on the property.On the basis that you probably wouldn’t rent somewhere if you were below the VAT threshold, so tenants are likely to be VAT registered, I’d expect that most are opted in for VAT but it’d be good to hear from people in this market what they’re seeing.
(Main interest being smaller offices/workshops below the SBR threshold)
There are not many businesses that rent premises that are not VAT registered, but there are a few such as banks that can't claim it back.
springfan62 said:
I would only opt to tax if a) I had to because it was already opted to tax or b) I was going to spend significant sums on the property.
There are not many businesses that rent premises that are not VAT registered, but there are a few such as banks that can't claim it back.
That's along the lines of what I am thinking. I am buying some to supplement other property holdings but need to spend a decent amount on conversion/renovation work hence, unless there were any pitfalls as a result, it seems sensible to opt to tax as a result.There are not many businesses that rent premises that are not VAT registered, but there are a few such as banks that can't claim it back.
Regarding claiming empty rates relief, using the premises for storage does not qualify, 'Wholly or mainly used for retail' is the term that my local councils use.
So yes, you can sign a family member up with a licence in an attempt to avoid paying rates on an empty unit, but it will be assessed if they are trading from the premises.
With regard to VAT it can be seen as being detrimental for resale, prospective buyers who are not registered, particularly with lower lot sizes, will need to register, (as will their tenants if they wish to reclaim the vat on the rent), which can deter some buyers.
So yes, you can sign a family member up with a licence in an attempt to avoid paying rates on an empty unit, but it will be assessed if they are trading from the premises.
With regard to VAT it can be seen as being detrimental for resale, prospective buyers who are not registered, particularly with lower lot sizes, will need to register, (as will their tenants if they wish to reclaim the vat on the rent), which can deter some buyers.
Just be aware that the uk gov will support the housing market through a crisis, they won't do that for the commercial market. In the 2009 financial crash commercial values dropped on average 44% and many very experienced investors lost their investments.
The banks are in a far stronger position now than they were in 2007 and the UK commercial market continues to boom despite Covid. However, it's a cyclical market and we're due a downturn. No idea when it will be, but it will happen eventually - yields of sub 3% on industrial are not sustainable long term.
The banks are in a far stronger position now than they were in 2007 and the UK commercial market continues to boom despite Covid. However, it's a cyclical market and we're due a downturn. No idea when it will be, but it will happen eventually - yields of sub 3% on industrial are not sustainable long term.
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