Buying council flat above commercial properties to live in

mark_cycling00

I once lived above an Indian restaurant. There's a big difference between the smell of food and what comes out of an extraction unit at the rear.
Burnt ingredients and burning oil a lot of the time.

Bags of food waste out the back stinking during summer.

Dry cleaners are banned from urban areas in some European countries...

I'd be asking why landlords haven't snapped it up at that price. It would be a 15% yield whereas typically yields in London are about 5% last time I looked.

thegreenone

hazyjo said:

Would want to knock loo/bathroom through. Some councils put a blanket no on knocking down walls.

It looks like a load bearing wall.  But.... the bathroom looks like it's got plenty of room for a toilet, so long as the plumbing works.  Then put a wash basin in the toilet or put in a space saving toilet with basin over the tank.

gwynlas

Current commercial tenants could change as could the hours of business, how would you feel about take away premises open until 4.00am? Council as freeholders mean hefty bills as those tendering for works have to be of a certain size in order to win contracts so no choosing non vat rated businesses for even small jobs.

BungalowBel

I don't think a flat above commercial units is a good investment, at any price.  And I don't believe Councils make good freeholders.

I would try to spend your money elsewhere. to something easier to sell in the future and without so many potential charges.  You never know how circumstances may change.

Also the flat will start to be even more unsaleable in 17 years time, as the lease will then be only for eighty years, and  many lenders will not give mortgages on it.  So there will be more expense to extend it.

eddddy

Every property has it's "market value".

If you like the property, and it's being sold at a sensible price taking account of its "issues" - then I don't see there's a necessarily a problem.

So the issues include...

• the council might charge higher service charges than other freeholders

• with a council freeholder, perhaps there's an increased risk of expensive major works

• plus the issues associated with the dry cleaners and restaurant

• it's not mortgageable (except perhaps with a sub-prime mortgage lender)

Some people will walk away because of those issues, others will just take them into account when deciding how much they are happy to pay.

And perhaps most importantly, you have to remember that you bought the property at a 'steal' price, so you'll have to resell it at a 'steal' price. So you'll need to be realistic about price, when you eventually sell.

NornIronRose

I am about to exchange on a maisonette above a commercial premises. 
Tbh what eddddy is saying is exactly the way I am looking at it. 
Freeholder is the local council. 4 maisonettes above commercial properties. Very quiet area. I will be above a beautician's that has been there a while. No service charge but I will budget accordingly. 
Survey puts the value of the property at what I am paying bearing in mind the possible future difficulties with selling and the fact that it is above commercial premises. 

My view is that I have a budget, and this property is an awful lot better than anything else that I can afford in the whole of our town. Most of the same cost are in crappy blocks of flats in not very good areas or in poor condition. 
Previous owner has been there since 2016 and the owner before about the same duration. So that is a good sign. And I also know his reason for moving which is legit. 

I believe I am going into it with my eyes open having taken advice from people who know their stuff. It just feels right. 
And my plan will be to live there til I retire to back home. So even if I don't make much money on it over the next number of years, when I sell it it will still let me comfortably buy something back home. 

Horses for courses I suppose. 

yungturl

Thanks all these are very helpful comments - as Eddy says, we're currently weighing up the pros and cons in either direction

Had a look at it on a late evening and area is nice, couldn't smell anything significant from takeaway and on closer inspection the flat is not directly above the laundrette /takeaways it's more diagonally up and across

Not too concerned on the investment front as I think higher for longer bank rates, stagnating job market and regulatory pressures on landlords will mean houses stagnate anyway, so would rather be less debt levered i.e. low mortgage (my own view, not objective)

We were competing with 3-4 other offers (mix of cash/mortgage) within a week of it going on the market so don't think it should be too hard to sell... also spoke to mortgage broker who indicated it would get a mortgage at 7% from specialist lenders - so definitely above best ~4.6% rates currently but not unmortgageable

yungturl

thegreenone said:

hazyjo said:

Would want to knock loo/bathroom through. Some councils put a blanket no on knocking down walls.

It looks like a load bearing wall.  But.... the bathroom looks like it's got plenty of room for a toilet, so long as the plumbing works.  Then put a wash basin in the toilet or put in a space saving toilet with basin over the tank.

This is something we want to check out / establish, exactly - would like to have toilet in the bathroom if possible

Olinda99

make sure you understand who the electricity and gas supplier is because if it is a commercial business rate you could end up on a deemed contract paying wildly inflated charges

yungturl

hazyjo said:

Councils can be a nightmare for high bills (not necessarily service charges). I'd want to knock and meet some neighbours and see what they're like and what they think of the block.

If planning a family, may not be ideal with steps.

Would want to knock loo/bathroom through. Some councils put a blanket no on knocking down walls.

I'd not want to buy a flat which is likely to be extremely hard to sell on.

Would you consider a mortgage on top? I'd much prefer to do that, but appreciate we're all different!

This is what colleagues at work have been saying re. mortgage - of course taking on the debt will (in all likelihood) mean better equity pay-off at the end, we're prioritising cash flow at the moment and I'd rather have fewer things tying us down in case we want to change careers etc