23-08-2006
Planning a commercial buy-to-let venture
The market for commercial buy-to-let property continues to expand, as residential landlords branch out into the commercial sector to enjoy strong capital growth and healthy rental incomes.
Mortgage providers offer an accessible route into commercial buy-to-let and can provide flexible finance for hospitality premises or retail, office and industrial spaces to let. 
Before approaching a commercial buy-to-let mortgage lender, be ready to provide:
- Bank statements for the previous three to six months to prove solvency
- Details of your income and liabilities (loans or other mortgages)
- Full details of all extant leases on the property
- Your rental expectations
When negotiating the terms of a commercial buy-to-let mortgage:
- Consider the Bank of England base interest rate. With rises predicted before the end of the year, a fixed rate could be better value in the present climate
- Expect to pay interest of between one and three per cent above the base rate, in addition to an arrangement fee of no more than one per cent of the loan
- Ensure that your projected rental income exceeds your mortgage repayments by at least a quarter
- Raise the highest deposit you can afford to reduce the rate. Some lenders will loan up to 85 per cent of the property value, but try to keep the loan below 75 per cent
When leasing your commercial premises:
- Seek legal advice when setting up a tenancy agreement. Legislation is complicated, so ensure you include all the relevant clauses in the contract with your business tenant. Your mortgage provider may be able to point you in the right direction
- Check to ensure that you are not in breech of any restrictive covenants. If any apply to your premises, this may drive up legal costs
© Adfero Ltd 2006
