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Borrowing to buy a disused pub
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suzannex
Posts: 10 Forumite
Hi,
Can anyone help with this one? We are looking to move and are considering the possibility of buying a disused pub for residential and possible future business use. Where could I get advice on this sort of venture and what possible loans/mortgages that are available? We would be looking at a purchase between 100 to 150K. We have around 80K equity in our current home and around 12K cash. I am in stable employment and earn around 48K per year.
Many thanks
Suz
Can anyone help with this one? We are looking to move and are considering the possibility of buying a disused pub for residential and possible future business use. Where could I get advice on this sort of venture and what possible loans/mortgages that are available? We would be looking at a purchase between 100 to 150K. We have around 80K equity in our current home and around 12K cash. I am in stable employment and earn around 48K per year.
Many thanks
Suz
0
Comments
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Its not something that I personally have had huge experience in, as I usually just refer to a specialist.
Things to be aware of are bigger deposits than a residential mortgage (you seem to have this covered) higher rates and higher associated fees from lenders and specialist brokers.
There was a real run of these being bought up in my area and converted into flats etc. although when I had a client trying to do this a few years ago, the lender wanted to see all sorts of additional information around track records etc.
Quite often aside from the specialist brokers, most high street banks have a commercial or business side that would get involved financing this sort of venture.
Good luck - hopefully someone more knowledgeable in this area will be along soon...I am a Mortgage Broker
You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it.This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
You need to decide whether the pub will be converted into a residental only or residential and commercial property.
Once you have decided that, then you can decide what type of mortgage you will need. Until then there are 2 completely different routes to go down its pretty difficult to give a specific answer i think.
1 is commercial lending, the other is residential.
You have (if you were to remortgage your existing property) what would appear to be a 75% Deposit on the new property which is pretty significant.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Yep, its all about the planning permission.
Round our area, the local council will refuse any application to convert a pub into sole residential use - consequence is there are lots of lovely, large (empty), and cheap pubs around.
Next issue is, if it is a pub purchase, and you need to borrow funds, it will be a commercial mortgage rather than residential - commercial mortgage co may want to see business plan to see how you will repay the loan.
Next issue is VAT. Most pubs are sold asking price +VAT.......if you buy a commercial place and then turn it into residential....you will have paid the VAT and be unable to reclaim/set it off against expenses. This is also tricky for mortgage purposes....you effectively need to borrow money to pay tax!
Lastly....most of the big pub chains selling off their poor (or even non) performing pubs have inserted 'Overage' or 'Uplift' clauses - which basically mean if you put in a planning app for change of use, you may be liable for giving the seller a % of the increase in value of the property (usually 50%) and the agreement holds for a 20 yr period.......so check to see if such a clause exists.
Apart from all that.....pubs can make lovely residential conversions, usually large rooms, old character buildings, central locations....and a car park.
Good luck.0 -
Conversions are expensive. Refurbishment will mean that you will incur VAT.
Sometimes cheaper to build from new.0 -
waveneygnome wrote: »Next issue is VAT. Most pubs are sold asking price +VAT.......if you buy a commercial place and then turn it into residential....you will have paid the VAT and be unable to reclaim/set it off against expenses. This is also tricky for mortgage purposes....you effectively need to borrow money to pay tax!
Lastly....most of the big pub chains selling off their poor (or even non) performing pubs have inserted 'Overage' or 'Uplift' clauses - which basically mean if you put in a planning app for change of use, you may be liable for giving the seller a % of the increase in value of the property (usually 50%) and the agreement holds for a 20 yr period.......so check to see if such a clause exists.
Just on the VAT, a pub with landlord accomodation is generally sold with VAT charged on 90% of the selling price, the 10% not subject to VAT is to reflect that residential nature of the landlords living space (usually above the pub).
If the sole intention is to develop for residential purposes, the buyer can issue a certificate to the PubCo/vendor do force the vendor not to charge VAT on the entire selling price as a buyer acquiring commercial property or land for residential development can "disapply the sellers option to tax".
But you are right, its a bit of a minefield, overage is a real sting in the tail and one more reason to hate PubCo's generally.Anger ruins joy, it steals the goodness of my mind. Forces me to say terrible things. Overcoming anger brings peace of mind, a mind without regret. If I overcome anger, I will be delightful and loved by everyone.0
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