Commercial Property Purchase

atomicmelon123 · 02-11-2023 11:09am #1

Hello all,

I hope this is the correct forum for this. I was wondering of anyone could share their experience in purchasing a commercial property?

My understanding is that a larger deposit amount is typically required compared to a residential purchase (20-30% vs 10%) and that the mortgage term is typically shorter (5-15 years VS up to 35). Is this correct?

Are there typically other steps / costs involved outside of the legal fees, planning application process & stamp duty?

For context I run a small business and am hoping to buy a premises instead of renting as the rent VS mortgage repayments (even with a shorter duration) look roughly equal. I know there is quite a bit of uncertainty in the commercial property sector at present but am happy to take the risk.

Any tips/advice welcome.

Spark Plug · 02-11-2023 12:20pm

You will also need to pay the Bank's legal fees associated with their solicitor establishing good and marketable title as well as taking security over the premises, the Bank will also want to instruct their own valuer and this fee will be payable by you as well. You are correct that a larger deposit will be required (up to 40%) will be required depending on the quality of the property and location etc.

Core6 · 02-11-2023 12:56pm

I am involved with a company that was renting and then bought out our offices.

As you say, the cost of the purchase roughly matched the rent so it was a relatively easy decision.

That was over 10 years ago and the value of the offices has increased since then which is good too.

The downsides are that the deposit required is larger (but the loan required is therefore smaller so repayments are lower).

You need to be sure that the property suits your needs both now and into the foreseeable future as commercial property may not be easy to sell in the short term.

The price needs to be right too -- it might make sense when you match it against your rent but is it correct for the value of equivalent properties in your location?