Buying a commercial premise is similar to purchasing a home in the sense that there is always a lease involved and you and will need the help of a solicitor or conveyancer to get the legal details finalised.
But that’s about where the similarities end. The differences when it comes to taking charge of a commercial premise – such as an office, shop, restaurant, factory etc – include such areas as how often you will be expected to pay the rent, the inclusion of business rates, possible VAT charges, a higher mortgage deposit and what you can claim back against tax as a capital expense.
Buying a commercial premise
The deposit for a commercial mortgage can be anything from 20 to 40 per cent of the cost of the building (25 to 30 per cent is common).
The length of the mortgage will typically be from three to 75 years and you may be surprised to find that, unlike a residential mortgage, there are no fixed rates. The rates will be higher since a business mortgage is viewed as more of a risk. However, again, unlike a residential landlord with buy to let, it’s possible to claim mortgage interest rates against tax.
Even if you have a bad credit rating, it might still be possible to get a commercial mortgage (of which there are two types – an owner-occupier mortgageor a commercial investment mortgage. The latter is similar to a buy to let mortgage.
Landlords of commercial premises are in a much stronger position when it comes to unpaid rent. They can add penalties and even evict. And when it does come to getting rid of sitting tenants they can change the locks and physically take back the premises. A residential landlord would have to go to court – which could take at least three months.
Interested in renting a commercial premises? Visit our sister site, iLet Properties to find out how!