Commercial mortgage advice needed...

paultuk

Hi all,


Just interested in some feedback or views on this situation.


Background on my business.
I currently run a business from a rented shop and have been doing since 2003. I currently pay £650 inc vat per month rent. The business is a franchise and currently I pay approx £1200 inc vat in franchise fees. I have been given the opportunity to leave the franchise (for a fee) and carry on under my own name which is no problem.


The shop I rent is too small so I have been looking to move into a larger premises but look to own it instead of paying rent!


Here is where I could go into huge detail but I wont and I will try to keep it as simple as possible.


I have found a unit which comprises of a warehouse and office block, it is not currently up for sale or rent but the office block is in need of repair and is currently unused. This unit is part of a site which is occupied by a tenant and they have no interest in using the office as the other unit on the site has office space.


I asked the current tenant if they would consider letting me rent the office but they said that they do not own it and their lease forbids sub-letting. The current owner has no long term plans as she is the widow of the previous owner and quite frankly has no interest other than collecting the rent. I do believe she would be willing to sell the whole site and a value of £300,000 has been mentioned but not confirmed.


The current tenant is a well established business but the current owners are in their late 50's and have no intention of purchasing the site themselves.


My Idea:


Look to purchase the whole site form the widow at an agreed price.
Continue to let the tenant run their business from the other unit/offices.
Move my current shop business to the unused office after refurbishing.




There would be income from the current tenant (rental figure unknown), my business could afford to pay £650 towards mortgage payment plus as we are no longer paying franchise fees there is another £1200 inc vat available towards mortgage payments.


My personal situation is this:


My current mortgage lender will not increase my borrowing as we have recently moved home. I do have another property though that I have recently renovated and is rented at £595 pcm. This property has no mortgage owing on it and has been valued at £130,000. Obviously I do not wish to sell this property yet as I have recently completed the work on it and want to recoup some of the renovation costs through the rent.


Sorry for the long winded explanation but as you can see it is not a straight forward situation.


What im asking is this:


Can I obtain a mortgage through the business to purchase the site? Can I get a 100% commercial mortgage or could I use the equity in my other house as collateral? Should I do it personally or as the business?


All feedback / opinions appreciated.

Brock_and_Roll

Highly unlikely to be able to find a Commercial Mortgage at more than 80% of the "bricks & mortar" valuation.

The mortgage free property is a potential game changer - obviously if you sell it or take out a mortgage on it. Not sure if any lender would merely take a charge over it these days though.

paultuk

Hi Brock_and_roll,

Thank you for your response.
Regarding the valuation... How does this work in commercial? The £300,000 was just a figure mentioned. Say the offer was accepted at £300k but say a valuation comes back at £500k what would happen then??

Cheers