Advice on freehold and shop purchase

soberade

Hi,
Hoping for some guidance, useful advice please.

I own the lease on a flat above a shop. (Mortgage paid off) (lease has 102 years left)
The freehold of the land and shop are coming up for sale...I have been given first refusal, before it gets fully marketed.
Valuation is pending.
Current freeholder advises on following:
Rent in region of £9k
Ideal price they wish to achieve £120k
Current shop use is jewellers in a busy high st in south East London (zone 4) close to train station
Lease is negotiated such that freeholder pays no repairs.
The shop has been in current use for many (20+ years)
The high street, has mixture of shops (c200) of which probably around 5-10 are empty shops.
Tenant of the shop is likely to stay, but that needs to be confirmed.

I clearly have number of questions over risk and benefits.
One benefit I see is that I would own the freehold and can receive rent on the shop, also I can then rent out the flat,(lease currently doesn't allow sublet) also I presume I can have more control and amend lease.

Risks I believe are if rents go down, or valuation is a lot higher, or tenant of shop leaves and difficult to replace.

Do people have any experience in owning freehold, and in particular on shops, that they can share, what type of questions do I need to be asking.

I would anticipate needing to get a commercial mortgage, I believe the rent would cover the mortgage payments.


I am certain I will need to consult with a broker and a solicitor but your thoughts are appreciated in advance.

Thanks
ade

Talc1234

Good yield @ 7.5%

However you will need a commercial mortgage (if not a cash buyer) and as you said there are risks.

- What is the remaining length of the Jewelry shop's lease?
- Could you afford to pay the mortgage of the shop during a void period?

However doing nothing is also risky. What happens if the new owner changes the use of the shop i.e. to a late night kebab bar. This could have a negative effect on the value of your flat.

Seek professional advice but I think it is a great idea

soberade

Talc1234 > thanks for comments,
Yep, need to check on likely rates and deposit required for commercial mortgage, I feel that I could cover the mortgage repayments though during any void period.
Clearly if valuation comes out much higher then that changes the yield and ability to secure the loan at a reasonable rate.
As mentioned, by being in control I can stop a kebab shop being the tenant! Plenty of those down the road!