Buying a retail premises.

[JJWinst]

Hi everyone,

Can anyone with experience of buying a premises relay how you found the whole experience? How much deposit you needed % and how easy/difficult it was to get a commercial mortgage.

I am considering investing some money in a retail property but am unsure how easy it would be to get a commercial mortgage.

Just looking for anyone with experience who can share it..

 

[Welsh Retailer]

I tried earlier this year, the bank wanted 25% deposit, but wouldn't look at the stockholding we have as an asset (£200k). As result we missed out on the building. Frustrating, as we increased the stockholding to increase the turnover, which is why we need the bigger building. Should have just held on to the cash we made over the last 4 1/2 years.

Only wanted to borrow £175k

 

[Mark Thomas Steward]

Hi,
You would be doing well to get 75% loan-to-value. It might be better to think about a 35% deposit. The key is serviceability. A lender won't be keen to fund a new shop unless you already have a business able to support the repayments.
The other thing to think about is whether you really need a freehold when there are many good leaseholds about at reasonable rents. Freehold shops have dropped in price over recent years, but even keenly priced ones are not selling as there's so little demand. I believe there's an oversupply of shop in this country in the region of 25-30%.

 

[John Austin]

You can get a leasehold shop but the lender might want a reasonable term on the lease for security. There are plenty of other lending options out there if the high street banks say "no". It all depends on the business plan and your experience. but about 38% of businesses don't look elsewhere if they are turned down by the high street banks, which is pretty amazing considering all the other options available.

 

[Stuart Bailey]

you need to contact a commercial broker they will be able to advise you what funding you can get.

Best wishes Stuart Bailey of Thomas Guise Solicitors.

 

[BristolBiz]

Much depends on if you are going to use the premises yourself long-term. If you are, it can be an attractive option, particularly if the premises are well located and reasonably priced.

I bought my own premises about 6 years ago, circumstances were very different then, though I guess the principles remain the same.

I employed a broker to search for the best deal - it was painfully easy then, 2% over base and did sir want any extra money!!

It was very much at the top of the property market then - but I had an existing business I wanted to relocate, and I'd had a lot of trouble with my previous landlord.

The mortgage payments worked out similar to what I'd have to pay in rent.

Even though the property is probably now worth less than what I paid for it, it still feels like one of the best commercial decisions I've made. I'll have paid off the mortgage in four years and it opens up a lot more options long-term.

 

[Talay]

I told my main bank that I would be coming for two tranches of funding in 2016, one for machinery at around £250k and another for premises at around £1m.

As with the earlier poster, serviceability is key. For the machinery, it is simply cheaper than leasing overall and for the building, the rent saving is more than the mortgage repayments now and when you factor in future rises, the advantage of a fixed rate mortgage (harder to get but not impossible), then the idea sells itself.

However, we are hugely cash generative with no current liabilities outside director loans to me (which I refuse to convert to equity).

Of course I have to give a guarantee but that is where we negotiate the terms of liability as it will not be open ended.

At the end of the day, we are a sure bet in many ways and I understand it would be a different playing field if we were a one unit outlet with little free cash and existing borrowings.

 

[tony84]

I think its around 30% deposit you need. There are some options which require maybe 25% deposit but I think they are few and far between.

It might be worth speaking to a Commercial mortgage broker, someone like @PaulThompson may be able to help.

 

[xnstandy]

it is easy to know, you can contact an agent to know the rate. Maybe this is the fastest way.