Buying a commercial property

Dick_Turpin99

I happened to be looking (purely on curiosity, thats all) at some sale details of a 175.5 sqm industrial unit advertised for 185k and confused over the terminology, it says the property is available as either a leasehold or a freehold basis....does this mean the price they are offering means that the purchaser is taking on a long term lease of the property and that to gain freehold the price would be higher?

In the blurb it talks of 13k annual rent, presumably that is what the purchaser could expect from the tenant.......which going on the sale particulars appears to already be installed

Quote: The premises are available by way of a new lease, length negotiable, drawn on tenant full repairing and insuring terms at an initial rent of £13, 000 pax. Alternatively the client will consider a disposal of the freehold interest, quoting terms available upon request.

lawriejones1

I assume this means that the Freeholder will accept a tenant on the terms you have outlined, providing the tenant pays £13k per year OR they will entertain offer for the freehold at £185k.

lawriejones1

...or if there is a current tenant, it may be sold on a currently-let basis, which means whilst you own the freehold, the current tenant has rights and an existing agreement. At £13k a year with a full repair lease, it's not a bad return on your investment, but the renting of commercial property is notoriously fragile, so proceed with caution.

Dick_Turpin99

Thanks Lawrie......kind of like a sitting tenant which therefore brings the price down

I had never really thought about this type of venture before, what immediately struck me was the good return on the capital ....compared to buy-to-let house for that price.

JQ.

lawriejones1 wrote: »

I assume this means that the Freeholder will accept a tenant on the terms you have outlined, providing the tenant pays £13k per year OR they will entertain offer for the freehold at £185k.

This is the answer.

And they are asking prices - lots of negotiating room in commercial property.

JQ.

!!!!!!_Turpin99 wrote: »

Thanks Lawrie......kind of like a sitting tenant which therefore brings the price down

I had never really thought about this type of venture before, what immediately struck me was the good return on the capital ....compared to buy-to-let house for that price.

It's not an investment they are offering - it's a vacant building.

There are very good rates of return on commercial property, however, the risks are significantly greater and the availability of finance is much much much less.

If you need to borrow money, good luck - you won't get a BTL you will need a commercial mortgage.

Dick_Turpin99

JQ.

Thanks for the reply.......and my apologies for sounding a little "thick" here....so 185k for the property as it stands......or if I wanted to rent it off them they would accept 13k a year.......think i have got it now

Are commercial mortgages that difficult to get?....they want business plans etc?

JQ.

!!!!!!_Turpin99 wrote: »

Are commercial mortgages that difficult to get?....they want business plans etc?

It depends what you want the property for. If you plan to occupy it yourself and run a business with trading accounts, then finance can be available subject to the business being viable.

If you want to buy a commercial property as an investment, then no, it's not readily available - you could get finance on a 15yr lease to Tesco with a 65% LTV, you'll struggle to get finance on a shop let to Tracy Jones for 3 years in Pontefract, well not a rate that would be appealing.

Most commercial banks are trying to reduce their exposure to commercial property investment at present due to the massive losses they made in that sector. Those that do continue to lend are therefore very picky indeed.