Buying a pub/hotel for use as a home

noahette

We put our house on the market on Saturday (30/04/16) and had an offer this Monday (2/05/16) which was amazing until we realised how much house prices had gone up everywhere we were planning to live.

We have 6 children and even though we grow our own fruit & veg, don't smoke/drink/eat out/go out or eat ready meals all of this is of no interest when it comes to getting a mortgage. Our outgoings are considerably less than our income, but this isn't considered either. So we are now having to look more than 40 miles out of the area we both live and work to find a home. Last year we were told we could borrow up to £235,000, yesterday we were told we'll be lucky to get £170,000! In that time between these offers my husband has got another job, earning £6,000 more a year and we have paid off a £17,500 loan 3 years early, so this seems mad!

Anyway it pushed us so far that we ended up deciding on buying a pub/hotel that is a 7 hour train journey away from our current home and family. It's in good condition and has 9 letting rooms (6 ensuite) this seemed ideal. My husband has spoken to his employers and he would be able to work in that area for the same company. It is not currently running as a pub and there is no change of use in place. The property was subject to VAT, but we would not be able to reclaim this as we are not a business. It turns out that there is a form you can fill out to be exempt from paying VAT, but this HAS to be filled in prior to change of contracts and you can only do that if it has residential planning in place. The property is for sale for £180,000 and we will have £30,000 for a deposit once we've paid our fees and moving costs, but is you stick the VAT on top, it's unreachable and we are also now learning that normal mortgages won't lend on 'commercial buildings' Our current mortgage provider has told us that the property would have to be modified before they would lend. They want all the ensuites removing and the second staircase taking down!! This in my eyes will devalue the building and we have 6 children, so 6 ensuites was like a dream. They said that they would need to be removed to prove it was no longer a commercial building. Our house has 2 staircases and an ensuite, and our mortgage lender (the same one) doesn't view ours as commercial. Commercial building mortgages/loans usually have a 70% LTV, sometimes less, making our 16% deposit pathetic.

Sorry for the long post, but does anyone know of a lender who would lend up to £150,000 for a £180,000 pub/hotel and know how to remove the VAT for a buyer who was intending to use the building for a home? I should also mention that we would have no intention on moving again, this was intended to be our forever home. Since our family is so far away, this was ideal for them to stay with us too.

davidmcn

Have you investigated with the planners whether change of use to residential would be feasible? You'd also need to persuade the sellers that it's worth their while entering into a conditional contract with you while you get planning.

noahette

My husband has just got off the phone with another lender and they said that even if change of use was in place, we'd still have to pay VAT! That would take the price above what we can afford and we wouldn't be able to get this refunded as we're not a business, which seems a bit like robbery to me.

TrickyDicky101

If you were able to get change of use the asking price might be considerably higher too.

casper_g

Friends of mine bought a six-bedroomed B&B (with five en-suite shower rooms, one additional shower room and a family bathroom) and converted it into a family home. They weren't required to make any physical changes to the property, either by the planners or the mortgage company.


In their case the sellers of the property applied for planning permission, but I'm not sure if this was done before putting it on the market, after accepting an offer or following exchange of contracts.

DigForVictory

We looked at a pub for the space, but it had no garden to speak of & was a bit too close to the centre - plus it still had the external "look & feel" of a pub, so we could see ourselves fending off inebriated unwanted visitors. The massive cellar with the stream running through it was a definite plus though.

Most pubs got bought by property management companies when they were forced to cut the ties to breweries & slapped with the option to tax so all the works were VATable - you need to get the sellers to unknot that & if they won't, then it isn't *your* forever home but someone from the management company's. Sorry.

Besides which, 6 bathrooms strike me as a nightmare not an opportunity, but I can understand other points of view!

elverson

Are there no houses closer to you which you would consider? I'm puzzled as to why you seem to considered this your only possible option.

The change of use required appears to be a risk so I'd speak with the planning officers at the local council before anything else.

Ozzuk

There is a guide on the internet for buying pubs, I'll dig it out if I can find it again. From memory, its possible but not easy and there are a lot of hoops you have to jump through (proving it's not commercially viable for one).

I have successfully changed a commercial property to a residential one but I already owned it so bought the property with a commercial mortgage. The LTV is more typically 50% as well, and you'll likely have business rates to pay.

As others have mentioned, the VAT issues is likely a moot point. If you changed it to residential the property would likely have a significantly higher price, probably close to the VAT price.

There are a reason pubs are cheap, and they can make amazing homes but it sounds like you simply don't have enough capital for the one you are looking at.

Found the link http://www.progressiveproperty.co.uk/blog/converting-pubs-residential-definitive-guide/

DKLS

They can make great homes, although it didn't endear us to the villagers when they realised we wouldn't be re-opening it.

arbrighton

Am wondering why you are planning on moving, and why you didn't look at prices before going on the market.
The pub seems like a non-starter to me. Given it's only two days since the offer, I'd be backing out saying not selling after all, sorry, which will be annoying for the prospective purchaser but they can't have done too much in that time.