It’s was only a couple of weeks ago that Jackie was giving you an update on commercial funding options, or lack of! but already that seems like a long time ago in the changing world of Covid! This week we have had more positive lender updates on what is available, which with the commercial enquires we are getting, is showing that this is an area that is proving popular.
So here’s an update on what we can do now in a nutshell. Its always worth a conversation if you have something that falls outside of this though, lenders are happy to go outside of this for the right client and property. A lot of cases benefit from talking it through, allowing to find another solution. That’s what we are here for.
We are seeing some big changes in what lenders are able to offer with semi commercial. Previously it was based on the residential rental for the property but we are now able to use the commercial rent in some situations. To use the commercial rental income, the commercial parts must have been trading throughout Covid and have continued to pay rent. We can then use this income, which makes a massive difference to your maximum borrowing. We are able to get up to 75% with rates starting at 4.8%.
We are seeing investors increasingly look to semi commercial property to diversify their portfolio. With a fully repairing lease, for usually a minimum of 3 years, it can offer a more profitable area of your portfolio. We have also seen a complete shift in what is ‘desirable’ in terms of tenant, with take away food outlets becoming far more popular than ever before. We do have a number of homes for these sorts of commercial units.
Commercial to residential conversions
With property prices seemingly artificially high at the moment, and there still being relatively low stock available, investors are looking for alternative projects which fit as a refurbishment project. Commercial to residential is a great option for this. The previous problems were commercial without planning; this is an area that we are now able to help with, allowing you to complete on the purchase prior to permitted development or full planning being approved, as long as we have a favourable pre app from the council. This opens up so many opportunities as you don’t need to buy it cash or try and delay completion, which can often lead to loosing out on the property due to other cash buyers.
We are just about to complete on a property in exactly this scenario and it has been a very straightforward case. It has shown that with the right lender there is a route of least resistance.
The door has been latched for a while on this sector – but always knowing it was not locked.
Commercial investment is now available, although capped at 65% loan to value, and there are some caveats but with a good covenant this ceiling may be broken. Caveats: There must be a business in the premises which has continued to trade and pay rent throughout Covid. This lends itself more to light industrial and retail type premises but there will be others that apply. This is really promising and as business hopefully returns to more normality we will see more opportunities.
Owner occupier is still a difficult area, even on an opco/propco basis. We will keep you updated on this.
As always we are here and happy to help with any enquiry you have, so please let us know if there’s anything you want to talk through. Have a great weekend!