Commercial property.

VeryMan
VeryMan Posts: 279 Forumite
in Small biz MoneySaving
Hi! I see advertised several commercial properties in London at very low prices, ie. 30-50k and they say they come with a residential flat above them. What is the catch? Why is it so low? Example http://www.rightmove.co.uk/commercial-property-for-sale/property-41508813.html

Comments

  • Pennywise
    Pennywise Posts: 13,468 Forumite
    Name Dropper First Post First Anniversary
    It's a lease for sale, not the freehold, so you're also paying "rent" to the landlord.
  • VeryMan
    VeryMan Posts: 279 Forumite
    Yes, I understand that it's not the freehold. If the lease if for eg 100 years, isn't still a good price?
  • Suarez
    Suarez Posts: 970 Forumite
    The premium is to buy the lease, fixtures and fittings. On your example you will be paying a rent of £24,000 per year for the property on top of the initial £30,000.
  • VeryMan
    VeryMan Posts: 279 Forumite
    Suarez wrote: »
    The premium is to buy the lease, fixtures and fittings. On your example you will be paying a rent of £24,000 per year for the property on top of the initial £30,000.

    I think you understood wrong. The rent is what you EARN, not what you pay. The only thing you pay, as I understood, is the lease, the 30k. The question is how long is that lease for. Ofcourse there maybe some ground rent or service charges involved.
  • dacouch
    dacouch Posts: 21,637 Forumite
    Name Dropper First Anniversary First Post
    VeryMan wrote: »
    I think you understood wrong. The rent is what you EARN, not what you pay. The only thing you pay, as I understood, is the lease, the 30k. The question is how long is that lease for. Ofcourse there maybe some ground rent or service charges involved.

    You pay the £30k and £24k a year in rent.

    In return you (Currently) receive £12k rent from the flat but have a shop unit you can use for yourself or rent out
  • phill99
    phill99 Posts: 9,093 Forumite
    First Anniversary First Post
    VeryMan wrote: »
    I think you understood wrong. The rent is what you EARN, not what you pay. The only thing you pay, as I understood, is the lease, the 30k. The question is how long is that lease for. Ofcourse there maybe some ground rent or service charges involved.



    No. YOU ARE VERY WRONG.


    The sum of £30,000 you are paying is to acquire an existing lease. It's known as a 'premium'. In essence somebody is selling a lease of say 20 years on a shop and this is the sum you have to pay to buy their leasehold interest. You will then pay a rent to the landlord (who has agreed to allow the leasehold interest to be assigned to a new owner - you) of £24,000 per annum.


    If you do not understand this you should not be getting involved.
    Eat vegetables and fear no creditors, rather than eat duck and hide.
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