One bed flat above retail premises appears unmortgageable

logie_bogie

Really appreciate any thoughts or advice - I'll be a succinct as I can...

I bought a one bed flat above retail premises in E11 London in 2013. In 2018 I put it on the market, listed at 270k, not much interest, I was moving out of London so at that point decided to rent it out and pay for full management of the letting. The rental covers mortgage, ground rent/service charge, fees etc.

In 2022 listed it again, this time at 250k, offers from buyers but banks wouldn't lend as flat above retail. Listed this year at 230k, on market for 6 months, offers from two very interested buyers - I accepted 210k and the potential buyer tried 11 banks with a mortgage broker but all wouldn't lend above retail. I've taken it off the market and the flat is tenanted with contract until Nov 2025.

(Flat is above a nursing agency but there is a chicken shop to one side and a restaurant to the other.)

I'm a single person on a low income, scrapped to buy the flat in my 40's after decades of renting myself. Since leaving London I've moved 8 times, been staying in friends spare rooms, am now renting a flat but my landlord is selling next year so I have to move again - I'm so stressed with the moving and struggling to afford market rents. 

All my money is invested in the flat. The boiler went this month so I've taken out a 4k loan to sort that, I am terrified of emails from the managing agents - I have zero savings.

If I sell at auction there is a risk I'll not have enough to buy property again, as my earnings are low and I'm 53 now. 

So... Do I put on the market in 2025, 2026? Or would people advise I go straight to auction then? Can see much changing with the situation in the next few years. 

Thank you for reading.

i_like_cats

With rents as high as they are now, won’t your flat appeal to investors who can pay cash?

Glancing at the competition, this 1-bed in E11 is on for £220k-£230k, yet is an unmortgageably small 24 sqm.  And with nearly £1600 a year in charges:

https://www.rightmove.co.uk/properties/155181155#/?channel=RES_BUY

PennysIntoPounds

If your tenants are contracted till next year, and your landlord is selling next year, could you not then just live in the property you own? 
That will probably come across harshly written down which is not my intention!
But seems like maybe it would be a better solution than stretching yourself across rent, management fees, and upkeep, rather than just focusing on what you have and how you can make it work for you?

annetheman

That's difficult... I'm sorry that I missed why you can't live there - taking that option off the table, when I was looking for flats in the past I saw quite a few that said in the advert 'CASH BUYERS ONLY' - could that help to attract investors/BTLers?

You may get slightly more from it than an auction or those instant-purchase type companies.

EssexHebridean

I’d agree that your flat would be likely to interest a cash buyer - I know roughly where you are I think, and it’s a cracking location for buses, overground and tube. I’d also be surprised if it was completely unmortgageable anyway - the flats above shops along there definitely do sell and folk definitely do get mortgages on them, so it maybe harder for people to borrow against, but probably not impossible. 

silvercar

Can you direct buyers to your mortgage lender? Presumably they were happy to lend on the property.

user1977

silvercar said:

Can you direct buyers to your mortgage lender? Presumably they were happy to lend on the property.

In 2013 yes - their criteria may well have tightened since then (also the shops may have since changed into "worse" types of neighbours - which is why lenders tend to be wary of benign types of retailers, as they can easily turn into a take-away etc).

eddddy

silvercar said:

Can you direct buyers to your mortgage lender? Presumably they were happy to lend on the property.

I was talking with somebody who owns a flat above a pub. When they bought it some years ago, Halifax agreed a mortgage.

Now Halifax, and all other mainstream mortgage lenders won't touch it.

Some mortgage brokers say that some sub-prime mortgage lenders will lend on flats above shops and pubs. But their interest rates are generally higher.

So perhaps it's a case of targeting buyers who are attracted by a 'cheaper' flat, but balanced against a higher mortgage rate. (As well as cash buyers.)


Often the advice to buyers is to be cautious of Estate Agent's in-house mortgage advisers - but in this case, it might make sense to sell through an estate agent with an in-house mortgage adviser who is experienced in sub-prime mortgages, so they can direct potential buyers.

PennysIntoPounds

Saw this in last week's paper supplement (yes it takes me all week to get through them 😁) and thought of you. Is it worth contacting estate agents and mortgage providers to ask if there are specific reasons for wariness with this property, in case you could address those? Hassle and potential expense I know but may be worth being informed

logie_bogie

Thanks for taking the time to respond everyone... Really helpful to have your input. When I list again I'll weigh up cash buyers and auction.