Retail Premises

mcguiver

Hi everyone,
Just wondering if anyone has hads any experience of buying/leasing a retail premises. I run a retail store..and the owners gettin old etc. family will sell up/get rid of me eventually, so my theory is to set up a similar operation.
I have all the contacts for supplies etc. but I've no idea where to start on a premises.

Anyone any experience on what I should expect to pay for rent/lease. Or has anyone bought a premises and lived there.(That seems more economical)

Thanks

Victor

On a lease, expect to pay:

key money
deposit
rent
rates
insurance
property maintainence

and then the rest of your bills

There are two main types of leases - FRI (fully repairing and insuring) and IRI (internally repairing and insuring).

Buying has it's own problems (full responsbility, etc.) but at least you are your own landlord and while paying a mortgage, you will eventually own the property. It also puts all your eggs in one basket.

Is there a chance of becoming a partner with your current employer?

Be very careful not to compete with your employer while employed. It's a sackable matter.

mcguiver

Thanks Victor,
It's a very specialist business + a fairly small set up and I've been running it for a long time...i.e when I go the business goes. Partnership has been talked about, but this guys a bit of a gangster... gone through bankrupcy etc. So that wont be an option either. Plus the fact that I'm running his business doesn't go down to well with his kids....they're all older than me and obviously should have ran the family business(if only they had a few braincells!)...so they've always let me know that when he goes so does the business/me!

The business currently has the building on lease from the owner (same guy) on FRI. So i'm familiar with paying rent , + rates + insurance etc. And I've done just about all the maintainence/ decorating etc. myself .

The term Key money?? is that oney to buy the lease??

My theory would be to sell my own property and get a small shop with overhead accomodation in a fairly busy area in Dublin.

RainyDay

Owning a property which you rent to your own business (at a market rate) is a pretty tax-effective way of extracting income out of a business. On a personal basis, you can get tax relief on the interest payable to your mortgage, which has a dramatic impact (in your favour) of the tax due on the rental income. And the rent is also a legitimate expense for your business. All the 'big boys' do this (Denis O'Brien etc).

However, taking on a big mortgage at the same time as you start up a new business would be challenging.

Victor

Originally posted by mcguiver
The term Key money?? is that [m]oney to buy the lease??

Essentially yes. Example: 50 years ago someone agreed a new £100 per year lease that lasts 99 years. Getting a new lease on that (or an identical) property would now cost say €50,000 per year. Someone that has the £100 lease can sell* the lease to someone else at a profit. As the rent is effective nil, the lease has a captial value of a multiple of the €50,000. Multiples of 20 or 30 probably exist in the current retail market (multiples are less for offices and industrial as they are oversupplied at the moment), giving a value to the lease of €1m-1.5m.

Most modern lease include, say, 5-year upward only rent reviews that greatly improve rent income for the landlord, but reduce the key money, as the differential between lease rental rate and current rental rate is much smaller.

A read of the property pages of the papers might help, as would advice from an estate agent, auctioneer or property surveyor.

mcguiver

Many thanks Victor.
That all makes sense. Now I just gotta start gettin my plan together+ looking around for suitable premises etc.

Cheers

Nuttzz

There are retail premises available without having to pay key money.

Your next problem is lines of credit, you may have contacts with the suppliers but they will most likely have procedures that new setup have to go through a certain period paying COD or the first numberof orders are COD, this can have a big implaiction on your cash flow

Best of Luck BTW

mcguiver

I've got that end of things covered. My main suppliers have given me lots of encouragement and will set up accounts with ok credit limits.
I'm guessing the best time of year to start up is around june/ july to get a golden pages advert in on time for publication. That gives me the guts of a year for planning, finding a premises, saving a few euro etc. Finance is the next thing... but a lot of that depends on the property. Currently I have a 2 bedroom property, .....sharing with a mate, so half the mortgage is covered... if I can get a retail property with similar room for 2/3 people overhead I can split some of the expense. Or ideally get property sorted and over the next year live there while I get it kitted out etc. and still work away??

Decisions decisions