The Appeal of Mixed Use Property
Semi commercial property, or mixed use property is taking on a greater appeal for property investors. This shift is driven by a change in stamp duty introduced in April 2016 because mixed use properties are considered to be ‘commercial’ rather than ‘residential’.
As a guide the stamp duty payable on mixed use property compared to standard residential buy to lets is;
For the property investor there are serious up front cost savings to be had by switching to mixed use properties as part of their overall portfolio.
What Are Mixed Use Properties
This property class is very common. To give you some examples of regular mixed use properties;
- Pubs or licensed premises with accommodation for the manager or landlord on site
- Retail unit on ground floor with separate residential flats above
- Work from home houses. Where your home is used partly as your business premise, in this case 40% of the property would need to be solely for your business use
By far the most common is the retail unit with flats above. Almost every high street or shopping parade have these units, it is something where we are seeing an increase in mortgage demand to finance purchases.
Over and above the stamp duty benefits we are seeing average yields on mixed use properties being circa 1% higher than straight residential, so for landlords looking at yield (or return on investment only) then the mixed use property is more attractive.
Mortgaging Mixed Use Properties
Once a commercial element comes into play the standard mortgage lenders tend to express caution. Obtaining a mortgage on a flat above a shop is fairly simple, when you buy the retail element as part of the transaction it falls into the commercial bracket and a different mortgage lender is required.
Obtaining mortgage finance on mixed use or semi commercial properties can be done, give us a call on 01293 541333. As a guide the total rental income will need to cover loan costs, whether that be interest only or capital repayment. Where rental income doesn’t fully cover then a view can be taken on other income or where a rental increase is expected in the future. In summary, don’t rule it out as there is nearly always a solution.
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