How to get a commercial loan

faheed

Im looking to buy commercial property for £190,000. the properties are actually worth £390,000. they are units in a mini shopping centre in North-East Scotland. the units are already rented out and are on a lease, which all have a few years remaining on lease. I have £30,000 deposit. I need a loan of £160,000 to complete the purchase. I have no assets. I have low income. but I have been advised that I can get the loan based on the properties current income. is this true? if so, how and who would be my best bet to get a loan from? I have good credit rating.
Thanking you in advance!

forgotmyname

If the property was worth £390k why are they not selling for £390k?

How will you pay the loan if they dont continue with the lease and you dont find anyone else to rent it to, Or it takes a long time to find somebody to rent it?

Im puzzled who / why someone would sell a £390k property for £190k ???

poppasmurf_bewdley

Someone selling something worth £390k for £190k?

If something looks too good to be true, it usually is.

dealer_wins

No one sells a £390K asset for £190K.

You are being scammed OP, run away fast!!

Tixy

Agree with the others that something in this deal does not stack up.

However to answer the question you would approach a bank for a commerical mortgage secured on the property. You would have a business plan and projections ready to detail all the current tenants leases, amounts, terms and how you would afford repayments to cover void periods in the lease.

The bank would value the properties themselves (based on the actual value and would also assess the strength of the businesses of each tenant to assess the strength of the projected future income) and then make a decision as to whether or not to lend to you.
You'd be well advised to also speak to an accountant to assess the best way to purchase the property (be that in your own name/in a limited company etc).

If the main clearing banks decide that the deal does not stack up for them to lend then it would probably be sensible for you to walk away as well. But if you were still determined to go ahead your accountant could probably introduce you to some second tier lenders - the cost of any loan would then be much higher than a high street bank but they do take slightly more risk when lending and as well as assessing the affordability of loan repayments will consider the risk of them losing money under a reposession scenario.

faheed

Thank you for your replies. You're right in that why would someone sell the properties for so less. They were in auction, hence the low price. We will be approaching 2nd tier lenders now. Thank you again

forgotmyname

So they may sell for much more than £190k.

With an auction wont you need the funds to be readily available when you bid?
Can you get a Mortgage on a property that you dont own and have not even bid on at auction?

bris

You wont get a loan based on the income alone. The length of the lease and the quality of the tenant(joe blogs means nothing, Ladbrokes would be good) is only a small factor in todays process.

What you really need is a substantial deposit, this is based on the purchase price, the valuation will not come into it. In todays market you may need as much as 50% certainly no less than 30 but if you can find a lender willing on a 30% deposit your doing well.

Another downside is your own assets, as you have none then getting the loan will be very difficult, lenders like security on personal assets for added security these days. Getting a loan will be very difficult indeed, with 30k and no assets you really don't stand a chance.

CKhalvashi

bris wrote: »

You wont get a loan based on the income alone. The length of the lease and the quality of the tenant(joe blogs means nothing, Ladbrokes would be good) is only a small factor in todays process.

What you really need is a substantial deposit, this is based on the purchase price, the valuation will not come into it. In todays market you may need as much as 50% certainly no less than 30 but if you can find a lender willing on a 30% deposit your doing well.

Another downside is your own assets, as you have none then getting the loan will be very difficult, lenders like security on personal assets for added security these days. Getting a loan will be very difficult indeed, with 30k and no assets you really don't stand a chance.

I've seen deals go through on 20%, but that's incredibly rare.

OP, you need to follow the above advice, as it's not been unknown for 20% yield on the lease to ramp up the value of the property, then the company to go into administration soon after, as could possibly be the case here.

davidmcn

faheed wrote: »

You're right in that why would someone sell the properties for so less. They were in auction, hence the low price.

If they sell for £190k at auction then they are worth £190k.

poppasmurf_bewdley

Smithjhon77 wrote: »

I have no idea more about it but i think the bank would esteem the properties themselves (focused around the real esteem and would likewise evaluate the quality of the organizations of each one occupant to survey the quality of the anticipated future wage) and afterward settle on a choice in respect to whether to give to you. You'd be generally encouraged to likewise address a bookkeeper to survey the most ideal approach to buy the property.

And in English this means ........??????