Mortgage to buy a Pub

Kath_3

Hi,

I know this probably isn't the right place to discuss this but wondered if someone could point me in the right direction. My partner and I want to buy a pub. He has been a landlord for years but always on tenancies from breweries where we are tied on buying stock. We want to buy our own and have found the ideal place at an affordable price. Where would I go for a mortgage on this type of property? We do intend to live there. I have a mortgage on my current property of approc £30,000 (the house is worth approx £135,000) and am currently undecided whether to sell or to rent it out. I would prefer not to use the equity in this for the pub. The total cost will be £140,000 and I would need to borrow £100,000. I don't have any problems with my credit history.

Is it normal high street Building Societies that I would contact or would I need to go to a specialist commervial mortgage lender? I have searched the net and there are hundreds of lenders advertising but I wish I knew a similar site to this one that discusses commercial stuff so that I could read about which lenders to avoid.

Any signposting would be appreciated.

homer_j_3

You are looking at commercial loans and with the pub industry being as it is and lending being as it is, you will need to have strong business plans and demonstrate that you are capable of running such an entity.

Clearly, your husbands work history will probably be good standing but you will be relying on the bank manager being happy with everything.

There are brokers that will do commercial loans, I have access to a few different high street banks and commercial departments but at the end of the day, as do any of the people that work within my network.

Its not like a residential mortgage, the focus is on whether the figures work. Clearly, the more you put into it, the better your chances of getting it as you have something to lose also.

Just to add that you may find that you can remortgage your home to top up the amount you are putting in if the rental figures work or income figures support.

The pub itself would be a consideration, looking at accounts and also the location may have some consideration too.

AndrewSmith

Good Commercial mortgage deals, like residential ones, are drying up fast. The best available are in the region of 7% fixed for 5 years.

Some points to note on commercial mortgages. They are usualy for a shorter term than a residential equivelant. The average term being 10-15 years, and are usually on a capital repayment basis. It is sometimes possible to negotiate an initial interest only period for the 1st 2-3 years for example, but this will be reflected in the interest rate you pay and will invariably increase the eventual repayments later down the line.

Commercial mortgages are more of a 'bespoke' package with each being tailored around the individual proposition being put forward. Unlike residential mortgages there is not a list of pre-determined products from which you can chose.

Be careful when looking at the licensed trade, find out in scrupulous detail why the current owner wants out. Many freehouse pubs are closing their doors due to not being able to make the money. Make sure that this is not a last attempt for the current owner to walk away with some cash in his pocket before the business fails.

Andrew

Conrad

The starting point is always the high st Banks as these are the cheapest potential sources. I got base + 1% from HSBC.

After that there are specialst commercial lenders usually accessed via a broker.

RBS or HSBC I found to be about as good as it gets. I usually haggle on the fees and rate.

Pubs are notoriously difficult business with about the highest failure rate of all sectors.

In village I used to live in the pubs changed hands every couple of years and always ended without sucess.

The most sucesfull pub Ive known was Jamie Olivers fathers in Clavering Essex, although it is not what it used to be.

Im fascinated by the relative sucess of pubs and have often thought about the reasons for relative sucess.
EVERY landlord plans not to fail and thinks they have the answers but in reality few do.
It seems to me that the few sucess's are run by fastidious, fussy, immensly hard working individuals.
Think about Gordon Ramseys kitchen nightmares. Every failure really comes down to a lack of fussiness which leads to luke warm, sub standard food.

The problem is, manyy LLs are deluded. I recall those that came saying they were great chefs yet who then presented squid that had a smell (it should have no smell), English style curries with typically too much cumin, soft luke warm roast potatoes, limp salad, glasses with lipstick residue and staff with yellow finger nails.
All these failures had 3 things in common; 1) Unable to see what thier clients realy thought 2) Over estimate thier cooking prowess 30 Personality type that just is'nt fussy enough (for example - I wouldnt have cieling ornaments or light bulbs that had dust on them but 95% of place do).

You either have a fastidious personailty or you dont, I do not think you can learn this 'nature'.


Good luck

RecoveringAlcoholic

Three pubs within half a mile of me have closed since Xmas.

Not my fault.