Landlord wants to sell commercial property to me

[Longfordian]

I own a small business in a growing midlands town and my landlord has approached me to see if I want to buy the property. There are three commercial spaces of which I rent one, another business has the second, and the third is vacant. There are three apartments upstairs. Total rent is about €4100 per month of which I pay €1,000. If I buy I would double my space into the vacant property which I need as my business is growing. The commercial leases are in the second year of a 5 year lease and should have strong potential for increases at renewal as the town has strong retail demand and the property is in the town centre. I have no business loan or other debt except my home mortgage which is €100k on a property valued at €475k. Any ideas on financing a deal like this? What is the best structure for ownership as the business is a limited company.? Any ideas appreciated.

 

[setemupjoe]

Remortgage your house to get to 20% deposit and to cover stamp duty ,fees etc ,buy it in your own name and rent it to your company .you will know from your own accounts how much rent you can pay and are willing to show the revenue as income.a section 23 property would shelter your rental income from the shop ,but thats another story .a good accountant can look at your situation and help you structure it right .i was faced with the similar situation a few years back and never looked back ....Good luck !

 

[auto320]

If you are wary of heavy borrowings, consider hiving off the apartments separately if that is physically possible -- apartment rentals in a small town can be more of a pain in the ass than anything else.

Also look at splitting the title of the three commercial units if not already done, so that all of them are not at risk in a worst case scenario. You can then refinance in a few years and load all the mortgage on one unit so as to cover your risk better., subject to best advice from your accountant and lawyer.

Agree that you need to keep ownership of the units either for yourself or a family member and rent them to tenants, including your own business.

 

[gonk]

a section 23 property would shelter your rental income from the shop ,but thats another story .a good accountant can look at your situation and help you structure it right .

Another option could be to acquire the property through a self-administered pension fund, which would also shelter the rental income from tax. There was good coverage of this in the business secition of last Friday's Irish Times (20/04/2007), if you can lay your hands on a copy.

 

[Longfordian]

Thanks all for the feedback. The property has some section 23 tax relief on it as it is fairly new. My main concern is upping my home mortgage. I would rather consider interest only loan for the first few years and then refinance as rents increase. It is not a straight investment deal as I also gain much needed space for my business. The asking price is €1.2m but I have just started researching commercial loans so I am not sure of the terms available.