02 Buy

HOME AND BUSINESS COMBO

There are several less well-known but cost-effective ways to become a homeowner.  One of them is a “home and business combo” – more commonly known as semi-commercial property.

If you are in the market to buy a home and are looking for something off the beaten track, it is well worth taking a look at semi-commercial property.

A semi-commercial property is one that is part residential and part commercial.

This blog looks at small, traditional semi-commercial properties commonly found on high streets and in town centres. 

A typical example has a shop, office or pub on the ground floor with storage or residential accommodation on the upper floors.

The commercial premises can be used by you, sold or rented out…with the upper parts being used as your home (subject to planning permission).

Buying a semi-commercial unit primarily for its residential unit may seem an odd way to go about buying a home – but if you find the right property and do your sums right, it can be a great way to obtain an inexpensive home – perhaps even at zero real cost.   

Semi-commercial property will be especially appealing if you wish to combine your residential and work accommodation for practical or monetary reasons.   

If the upper floors don’t have formal permission for residential use, you will need to get permission by application to the local planning authority.

Ideally you want to find somewhere where the upper parts are already authorised for residential use and have their own separate entrance, preferably at the front of the building.

If there is no separate access, you should make enquiries in advance of buying to see if you are likely to get permission to create a separate entrance.

Creating a new entrance would add to the total cost of purchase and you should try to factor that in when agreeing a purchase price.

Semi-commercial units are often attractively priced due to relatively low demand from buyers in general. 

With the retail sector being badly hit by internet shopping, redundant shops are more readily available than ever – and can be picked up at bargain prices in many parts of the country. 

1. Pros of semi-commercial property

A semi-commercial building can offer the opportunity to acquire a relatively cheap residential unit on the back of a commercial unit.

A big attraction of semi-commercial is its versatility:

  • You can use it as a home and business or
  • You can use it as a home and sell off or rent out the commercial part.

Therefore semi-commercial premises may offer you the chance of a capital gain or an ongoing rental income, as well as a home.

If a semi-commercial property is on a single legal title, you may be able to add value simply by splitting the title into two – one for the residential part and one for the commercial part.

Before title splitting, you may need to ensure that each unit has its own separate services such as gas, electricity and water – which of course will be an additional expense. However, you may find properties with separate services already in place, and such properties are a potential bargain.

In addition, commercial property often offers the opportunity to add value by refurbishment and modernisation.

A large garden, rear yard or car parking space may offer development opportunities. 

Remember that you don’t have to buy an entire semi-commercial property to get the price benefits of residential accommodation situated above commercial premises.

You can simply look to buy a well-priced flat above commercial premises. Ideally you should look for a flat above an office or a quiet, early closing shop – avoiding flats above a pub, takeaway or restaurant. 

2. Cons of semi-commercial property

Perhaps the biggest drawback of buying a semi-commercial property is that you will need a commercial or semi-commercial mortgage rather than a less expensive and easier to obtain residential or buy to let mortgage.

Typically you will need a larger deposit than with a regular residential property.

The number of mortgage providers will be smaller and the mortgage interest rates are likely to be higher.

You are more likely to be offered a repayment mortgage than an interest only mortgage

Other drawbacks could include:

  • There will be an element of risk or uncertainty if you need planning permission to use the upper parts as residential, split the building into two or more units or create separate entrances.
  • If the building is in a poor condition or needs updating – which is often the case – building works will add to your costs and time input.


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3. Home and business combo

Semi-commercial property may be an attractive option if you have or want to start a business which can operate from the commercial part.

Buying residential and commercial space together is a way to reduce your expenditure on both.

Living above your place of work gives you the convenience and saving of not having to travel to work – although there can be downsides to this arrangement.   

The flexibility of semi-commercial accommodation is great: you can use the commercial space yourself or allow someone else to use or share it. 

4. Special considerations

VAT may be payable on semi-commercial property and that could increase your purchase costs. However if you are VAT registered you may be able to set off the VAT expenditure.

Only the residential part of the building may qualify for private residence allowance in the event of capital gains upon a disposal. 

You will pay business rates on the commercial part of the property and Council Tax on the residential part.


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5. Importance of advice

Generally semi-commercial property is more complex in terms of use, funding and taxation. It comes with more moving parts than mainstream residential property.

It is highly desirable to seek advice from a mortgage adviser, accountant and solicitor in advance of your purchase.

6. Conclusion

Finding your home by buying a semi-commercial property can be an interesting and highly effective approach.

If you can add substantial value to the property by carrying out works and/or splitting the title, and later refinancing the whole building or selling part, you could end up in the amazing position of owning your home with zero net contribution on your part. 

Now that is a true win-win situation! 

Does a semi-commercial property appeal to you? Could you live above your place of work?  Please leave your comments below.

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Dalton Barrett
Rebel Property Coach

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1 reply »

  1. This is a very good pathway to house and business ownership. As the old adage says…..a bird in the hand is worth two in the bush.

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