Buying a house with existing holiday let and running a business from home.

NSWhite

I’m looking to buy a £785,000 house that has an existing holiday cottage that takes £15,000 per year.
I would also like to run my rehab/pt business from there in an existing workshop. This takes £50,000 per year.
I have £175,000 as a deposit. (After the sale of my existing house)
Is it possible to purchase this property with these figures and what is the best way to go about this.

I look forward to some advice.

davidmcn

Sounds unlikely, unless you have other income?

G_M

....takes £15,000 per year.

Is that the income?
Or pre-tax profit?
Or profit after tax?

You won't get a residential mortgage. Speak to a financial adviser about a commercial mortgage?

Or a bank about a secured business loan......

chappers

Almost certainly no.

Residential mortgage wouldn't work on affordability and that's before you even consider the unsuitability for the holiday let, side
Wouldn't have thought you would have anywhere near enough equity for a commercial mortgage of that size, they would want a business plan that would support that with monthly repayments of around £3-4k and then your own personal living or show an alternative income and two businesses so reliant on the proprietor would just be too big a risk.
One possibility is if you could put the main house on the letting market, whether long term or holiday let and essentially be living in say a static caravan, again this would dependant on a strong business plan.
Essentially for this sort of leisure type venture though you are going to be shot down by the LTV requirements which are going to be in the maximum 50% region, maybe pushed to 60-65% if the place already has strong trading figures.
Commercial loans are far more risk adverse than residential loans, especially to these businesses that are so dependant on the proprietor. A bed and breakfast is just about the only worst business you could choose.

We are just about to complete on a similar venture, two holiday lets income, (net profits) around £20k LTV 26%, very explicit non residential clause(on our part) for both properties, required confirmation from her employer that my wife would have an ongoing income, full business plan with financials, was seriously interviewed at both a national and local level by the lender.

You might find someone willing to lend on it at a very subprime rate but would probably break you.
If you like I could put you on to a commercial broker, who if he couldn't fund it I don't think anyone could, but I reckon you will be wasting your time.

NSWhite

Thanks for all of your responses and advice. Here's a quick breakdown of figures if this helps. I am talking to various financial advisors this week to see if there are any options for me. As you say the LTV is more than likely going to let me down.

Thanks again.

£175,000 - Deposit.

£50,000 per year - Rehab/PT turnover

£20,000 per year - Gym Profit. Separate business and location. Trading for 17 years.

£10,000 per year - My Partners Salary.

£15,000 per year - Holiday Let.

Holiday Let Income

April 2011-2012 £11,463 - 41 weeks occupancy.

April 2012-2013 £14,123 - 44 weeks occupancy.

April 2013-2014 £10,845 - 10 weeks occupied by family.

April 2014-2015 £15,206 - 46 weeks occupancy.

April 2015-2016 £15,844 - 48 weeks occupancy.

April 2016-2017 £16,400 - 48 weeks weeks occupancy.

The cottage has only electricity as an amenity at a cost of £150 per month. It has 100% small business rates relief.

davidmcn

NSWhite wrote: »

£50,000 per year - Rehab/PT turnover

£15,000 per year - Holiday Let.

You'll need to work out the profit for those rather than turnover.

But even if it's all pure profit you seem to be wanting a loan of 6.4 times your income? Do you think it's affordable, even if the lenders don't?

NSWhite

Hi yes I do feel it’s affordable. The £50,000 is after tax and no real overheads apart from a little electric, the odd light and one machine as everything else is self powered. The £15,000 for the holiday let on the numbers I’m looking at from the exsisting owners is before tax.
I know it’s not this simple but a £620,000 mortgage at 3.5% would equate to £3,105 per month over 25 years (as an example) because I’d be working from home the £50,000 (£4,100 per month) would go straight into paying the mortgage plus holiday rental, partners income and gym profit would more than cover this and living costs.
I understand though that my needs and criteria don’t fit the standard lending parameters.
Thank you for taking the time to reply.

Sparramong

Go for it is my advice!

davidmcn

NSWhite wrote: »

I know it’s not this simple but a £620,000 mortgage at 3.5% would equate to £3,105 per month over 25 years (as an example) because I’d be working from home the £50,000 (£4,100 per month) would go straight into paying the mortgage plus holiday rental, partners income and gym profit would more than cover this and living costs.

Try working it out with higher interest rates (as that's the test that any lender would also apply).

Ozzuk

Not sure where you are getting your mortgage figures from...have you talked to a broker? You likely won't be eligible for a residential mortgage, if you go down the commercial route you might need as much as 50% deposit, along with a business case and much higher arrangement fees/rates. You'll also have to pay business rates on the property.

How much any of that will be applicable will be down to your lender...I had to do all that when buying holiday lets, but it was 100% commercial. many won't even lend on mixed properties.