You may have numerous reasons why you’d like to purchase commercial property in London, but before you buy it’s worth understanding what process you should follow and what the key advantages and disadvantages are.
Commercial property for sale in London can be broken down into four principal sectors; offices, retail, industrial and leisure. If you are a small or new business without the capital to buy a property, renting may be a more viable option.
For larger businesses, those that have formed a professional partnership or, if you own a shop or pub and wish to live above the premises, buying commercial property can have several benefits. To help you make sense of how to secure an investment property, purchase a new headquarters for your company or expand your existing portfolio, here’s our guide to buying property in London.
Advantages to buying your own commercial property:
There are some key advantages to buying your own commercial property. Principally you have the freedom to use the property, redesign, decorate, make repairs and move when you wish. You also receive a profit and have no rental increases and interest payments on commercial mortgages are tax deductible.
You can also sub-let out part of the property to lessen your mortgage repayments and in future, if your business moves, you can let the property to receive another income.
Disadvantages to buying your own commercial property:
Of course, there are also distinct disadvantages, and these include the fact that when you buy a property you tie up capital which could be invested elsewhere in your business. If the property loses value, it could impact on your business capital.
Making alterations or carrying out building work can also take up valuable time and you will be responsible for the safety of the building, health and safety and fire precautions. Buying commercial premises often has a higher overall cost than renting for the first five years, equal for the next five years, and then cheaper from then on.
Therefore, anyone looking to buy commercial property should view it as a long-term investment for your business.
Deciding On Your Requirements
One of the hardest things about buying property in London is finding what it is you’re looking for.
This is because finding a property for sale that matches your requirements, budget or location can be tricky and when one does come up you may have competition from other interested parties.
In this instance, it helps to give your exact requirements to as many estate agents as possible so that they can let you know when properties matching your requirements come up on the market.
Some things that you will need to consider are:
- Budget – can you afford the property? If developing, would you be able to make an income?
- Space – have you got room to grow as a company? Have you got enough space for equipment, storage and anything else you may require?
- Legal requirements – is the building structurally sound and does it meet all health and safety and fire requirements? Does work need to be done in order to make it compliant?
- Repairs –do repairs need to be made or can you move straight in or? If repairs need to be made, how extensive are they and how much will it cost to fix?
- Accessibility – is the building disability friendly? Can it be easily found from the street? What are the nearest public transport links?
- Restrictions –before making an offer make sure you find out what building restrictions are carried with the property, because a lot of London property is very old and may be listed.
Once sure that this property is perfect for your needs then you’ll need to move quickly in order to secure it.
Choosing the Right London Location
A good location for your business is critical. When searching for commercial property for sale, make sure it is in a location that best suits your business needs.
For example, goods producers may need to look for a commercial property with excellent transport links, retailers may need to be close to customers, suppliers and other London retailers.
High tech communications may wish to choose a location outside the city centre, to get more office space for their money whereas media offices may need to consider the commuting needs of staff and clients, and whether the area they move to suits their business brand.
You may also wish to consider other factors that may affect the suitability of the premises for your business, including parking facilities, congestion charges and delivery restrictions, transport links, local planning restrictions, crime rates and amenities for staff and clients, including restaurants and supermarkets.
Making An Offer
When you are ready to make an offer there are many things that can affect the price you wish to start at, including long the property has been on the market for, the state of it and what competition there is for it.
A good rule of thumb is to start low and work your way up slowly – the cheaper you can buy the property for, the greater the profit you will make in the long run.
As soon as you’ve had an offer accepted you will need to get the finance required to make the purchase quickly to prevent being gazumped and losing out on this opportunity.
Getting The Right Finance
Unless you have a large amount of cash to spare, you may need to get a commercial mortgage to finance the property’s purchase.
Take your time to research the best mortgage for you or take on a commercial property broker to find the perfect deal for your needs.
Due to their market expertise and connections with lenders, brokers know who to approach and how best to present your circumstances in order to be effective in your application.
Be aware that to get a commercial mortgage, you will need to commit to a minimum mortgage term (often of about 15 years) and pay a considerable deposit.
As part of your mortgage application, you will need to arrange for a survey to be carried out, which will assess the value of premises, the property's condition and investment value, and the state of the commercial property market.
It is sensible to arrange to have this survey carried out yourself, rather than rely on your bank, as you would be liable for any problems that are overlooked.
Your lawyer will then be able to advise you on your mortgage contract and negotiate the terms of your mortgage arrangement.
Completing The Deal
Once the finance is sorted, your surveyor and solicitor have negotiated the terms of a contract with the seller, any planning permission you require has been approved, all building checks have been made and all parties involved are happy, all that’s left to do is exchange and complete.
Exchanging contracts makes the purchase legally binding. Up until this point, beware that you may be at risk of being ‘gazumped’ by other potential purchasers.
When you exchange contracts, you will need to pay your deposit on a property and once this has gone through, you are ready to complete the purchase to become the owner.
On the day of completion, your solicitor will hand over the purchase price to the seller’s solicitor – which is when your repayments to the lender will begin. You will also need to ensure you have adequate insurance in place, Stamp Duty Land Tax paid and have registered your ownership with the Land Registry.
Your solicitor will receive the deeds (papers giving details of the property and the owner) to your commercial property – these deeds are then sent to the lender.
Expert Advice For Investors
To find out more about securing the best commercial finance for your needs, talk to Prideview today.
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