Self Employed - considering Purchasing existing premises from landlord - advice neede

ayatollah

hey all

currently been where i am for a long time now,

pretty much at capacity though now

landlord is unwilling or unable to upgrade the premises, 2 floors above of untapped potential.

dont want to move, have considered renting additional units nearby in addition to base unit shall we say.

the question i have

and is starting to knaw and knaw in the back of my mind is

should i look into purchasing the building from the landlord?

i see huge potential in it, it is an older building and in need of some tlc no 2 ways around it, i have been entirely responsible for the upkeep for years now anyways

but as a potential asset andas opposed to renting a 2nd or indeed 3rd unit, should i be looking at it?

what kind of money should i be thinking?
i'd have to get it valued i'd assume
is there any schemes (government or bank?) that i couls look into.

is this a loan situation as opposed to a mortgage one, i've heard mention you need at least 40% of the borrowed amount?
will i be liable for any additional taxes on the purchases and ongoing?

anyways

looking forward to and welcoming all feedback.

thanks to all in advance

lomb

Did the landlord offer it for sale?
Commercial mortgages yes need 30-40% depending on strength. They tend to be 15 year although 20 are available from Boi so payments are high. They are also commercial loans so it's an overdraft rather than mortgage and the bank can ask for full repayment if they think your situation has weakened. That's why you should never borrow from anyone other than a mainline bank Boi or Aib.

ayatollah

lomb wrote: »

Did the landlord offer it for sale?
Commercial mortgages yes need 30-40% depending on strength. They tend to be 15 year although 20 are available from Boi so payments are high. They are also commercial loans so it's an overdraft rather than mortgage and the bank can ask for full repayment if they think your situation has weakened. That's why you should never borrow from anyone other than a mainline bank Boi or Aib.

hi thanks for your reply

i'm looking into it before i approach the landlord

i just want to do a bit of research first, i was trying to see if there was a regsiter of commercial buildings prices online but could only see residential listings

again just at the tyre kicking stage, but i think i could make massive use of it and reall turn the place around, i was actively looking at 2 other units nearby to rent in addition to what i already have, so i feel confident that i can meet the repayments, well in theory, i just nee to know what else i should be considering here, for example the shorter term than the mortgage you mentioned is something i wouldn't have known til now.

lomb

Forget it, if the landlord doesnt want to sell in most cases unless he receives an offer above market then he wont do it. The corona may help as he probably would realise they arent going up for 5 years or more but acts as a disincentive to you.
Frankly youd have to be crazy to buy commercial at the end of a business and credit cycle and staring into the teeth of possibly the greatest , second or third greatest economic depression in history.
Back in 2012 I could have bought 3500 sq foot in D8 Liberties, the entire ground floor of an apartment building, two units for 87000 euro, I would assume in the boom they were worth 1.4 million, today probably around 1 million k
I basically could have retired off the rents.

listermint

lomb wrote: »

Forget it, if the landlord doesnt want to sell in most cases unless he receives an offer above market then he wont do it. The corona may help as he probably would realise they arent going up for 5 years or more but acts as a disincentive to you.
Frankly youd have to be crazy to buy commercial at the end of a business and credit cycle and staring into the teeth of possibly the greatest , second or third greatest economic depression in history.
Back in 2012 I could have bought 3500 sq foot in D8 Liberties, the entire ground floor of an apartment building, two units for 87000 euro, I would assume in the boom they were worth 1.4 million, today probably around 1 million k
I basically could have retired off the rents.

Why didnt you. ?

lomb

listermint wrote: »

Why didnt you. ?

Stupidity and listening to a friend who didnt know anything about it. Remember at that point no bank would lend it was cash only, which I just about could cobble together but would need a tax loan from the bank to pay the Revenue for that year.
You have to remember it was shell and core with no tenants and no mortgage possible.

beauf

You'd really need to work out is the lack of capacity costing you business. If so how much.
If your business hasn't been, and is unlikely to be effected by a recession?
If it were I think I want to rent, so have some flexibility if a recession hits hard. It might not.

ayatollah

Thanks again all
Update
Had a builder mate of mine give it the once over today

Basically concurring with a lot of whats been mentioned here

I asked him flat out is it a bad idea or not

His summation was
If you buy it
Yes we can do it up until then dont spend another penny on it
But said hold off for now and see if he wants to sell it.
But problems will be the valuation hell seek on it compared to what you (me) knows it to be worth.

As its kilkenny and prices never dropped here
Like at all.
We literally have high profile
Lovely modern and recently updated premises lying idle.
As landlords either dont need the money that badly or have had smoke blown up their arse by auctioneers and letting agents as to what the value of the units should be.

Im actually due to see him tomorrow on something else so ill suss him out

But sitting on this for a couple of months might be prudent for now.

lomb

Kilkenny is regional property so higher risk and thus greater drop potential if theres a credit drought which likely there will be. You should try to have as much cash as possible so you can strike if something comes up. Rates are also due on vacant property so no one wants to keep paying that. Saying that if your business is super profitable I wouldn't worry about property investing and timing.

iamafoodie

Generally it about 10 times the annual rent. In your case it will be more because of the 'potential' rent from the two vacant floors. I'd say 10 times your rent plus 3 times
The potential rent on vacant floors. That's how it went on one I bid on anyway.

Also definitely need to look is the return there on your investment. Also I'd be a big fan of one floor plate as opposed to stairs going up and down

Do you need to be in city centre for your customers?

Pawwed Rig

If you do this please talk to a tax advisor before you sign anything. There are ways to structure these types of deals. For example, it MAY be better to have the building in a company where the rent will be taxed at 25% rather than holding it in your own name. There are exit risks there though that you would need to be aware of.
Could you set up a pension scheme that could hold the property? Zero tax on rent but off limits to you until you reach the relevant age. A couple of grand in tax advice could save you tens of thousands of euro

ayatollah

iamafoodie wrote: »

Generally it about 10 times the annual rent. In your case it will be more because of the 'potential' rent from the two vacant floors. I'd say 10 times your rent plus 3 times
The potential rent on vacant floors. That's how it went on one I bid on anyway.

Also definitely need to look is the return there on your investment. Also I'd be a big fan of one floor plate as opposed to stairs going up and down

Do you need to be in city centre for your customers?

ah were established here, a lot of our custom comes from our convenience


whats a 1 floor plate?

ayatollah

Pawwed Rig wrote: »

If you do this please talk to a tax advisor before you sign anything. There are ways to structure these types of deals. For example, it MAY be better to have the building in a company where the rent will be taxed at 25% rather than holding it in your own name. There are exit risks there though that you would need to be aware of.
Could you set up a pension scheme that could hold the property? Zero tax on rent but off limits to you until you reach the relevant age. A couple of grand in tax advice could save you tens of thousands of euro

thats actually very interesting, i'd been thinking basically if all else failed i'd have the property as an investment. so i must look into that. thanks for that.

iamafoodie

1 floor plate, just one floor so no stairs, makes layout and trading a lot better. Depends on your business