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Having a mixture of property types within your portfolio is a good way of diversifying yourself across the investment BTL market.
Although the rates are typically higher for semi-commercial properties than standard residential units, you’re going to benefit from multiple income streams, as well as potentially guaranteeing that income over a longer period of time in the form of lease agreements for the commercial aspect of the building (if you have a strong tenant who wants to stay for a long period of time).
It is also becoming more and more popular for landlords to make use of the commercial to residential permitted development rights. An example of this that we are seeing a lot, is a fully commercial building that sits across 4/5 floors being converted into multiple flats, with a singular commercial unit remaining on the ground floor.
These property types will require a semi-commercial mortgage on it, to benefit from the income and value of both the residential and commercial aspect to the block.
What financing options are there for Semi-Commercial properties?
Whether you are looking to purchase a semi-commercial building to add to your portfolio or refinance an existing block that you are already own, there are specific lenders in the market that will be able to look at these situations. See below a few examples we have found solutions for:
• 16 flats and 7 shops – all flats below 30 sqm
• 4 flats above a Chinese takeaway
• 6-bed HMO above a tattoo parlour
• 9 flats above an office
We can typically get 75% LTV based on the vacant possession value of the property and this is on an interest-only basis.
What other factors need to be considered for Semi-Commercial properties?
Not only do we need to approach semi-commercial lenders for these property types, but each individual lender has their own criteria which can help in different ways such as maximising lending or getting the mortgage completed as quickly as possible.
• There are lenders who will lend on the aggregate value of the block, for example: 5 flats above 1 commercial unit on 1 freehold title – we have access to lenders who will request the valuation to be based on the individual split values (as if each unit was on its own leasehold) instead of the block value which can be 10-15% lower than the aggregate value.
• We have access to lenders who can use title insurance on semi-commercial transactions. This effectively means, at the legal stage the insurance covers the needs for full searches / checks to be completed. This can mean completing with 1-2 weeks of the mortgage offer being issued.
• It can sometimes be the case that the commercial aspect of the property is worth more than the residential aspect, for example: 2 flats worth £125k each above 1 commercial unit worth 300k – a lot of the lenders would class this as a commercial property and will have to proceed on fully commercial rates (higher than semi-commercial rates). However, we have access to lenders who do not have a minimum value split. As long as there is a residential aspect, it will be classed as a semi-commercial property and the cheaper rates will apply.
• We can often see the flats within these semi-commercial blocks are below 30sqm which for a lot of lenders is a no. However, we have competitive options for when these situations arise.
These are just a few factors that can relate to semi-commercial properties and the type of finance that is available but there are also so many other things we come across. Once we understand your personal situation and the various important needs you have, we can start reviewing the potential options available.
How can Advocate Finance help?
Here at Advocate Finance, we specialize in semi-commercial property mortgages and will be able to find the solution that meets your needs. Whether the flats in your semi-commercial block are all smaller than 30 sqm, or if you’re having trouble getting finance on the building because of who the commercial unit is let out to, or if it is just a straightforward semi-commercial asset and you don’t know where to start, we will be able to help find a financing option that works for you.
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