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pokercola

Buy to let is dead (Telegraph article), buy shops instead!

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What type of shops? All I see are empty units or massive shopping centres owned by corporate interests. Can't see there being any gold at the end of that rainbow, the future of shopping for many is online, the retail space required to cater for the luddites and those who want to shop as a hobby is well bellow our current capacity.

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Graham Chilvers, a seasoned landlord with 30 years' experience, has turned to commercial property for this reason. 

He doesn't plan to sell any of the 75 [implied non-comercial I think - my comment] properties he has bought over the years, and is confident that he will be able to continue paying his mortgages, as they are all relatively small.

What a pillock of the community, 75 families who work to fund his lifestyle and he gives them almost nothing in return.

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"I thought about going down the limited company route, but I understand the Government are already looking into closing that loophole, and I think it would cost too much to do" he said. 

Moving property into a limited company can also have significant tax implications, with owners potentially incurring stamp duty and capital gains tax liabilities.

Interesting, I wonder how many other large(ish) LL's are in the same boat but on IO. The more the merrier I say.

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High street banks can be inflexible when it comes to commercial lending ... They are less likely to offer interest-only mortgages and will often only lend for the period of an existing lease, which can be too short to repay the whole loan.  ... The regulator is not keen on long-term interest-only ...

So, most people are not going to be able to get a slice of this amazing new 'opportunity'.

Edited by doahh

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High street retail is dead, it's all moved to indoor malls.  Sandwich shops, charity shops and bookies make up the majority of UK high streets outside of Intu and Westfield type malls.

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Yes bit of a feeling of clutching at straws with this one, the money for nothing HPI forever risk free BTL dream is dead therefore the opportunity must exist somewhere else.  Even the article doesn't commercial property sound a good bet, and they are spinning it as hard as they can.

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35 minutes ago, Northern Welsh Midlander said:

What type of shops? All I see are empty units or massive shopping centres owned by corporate interests. Can't see there being any gold at the end of that rainbow, the future of shopping for many is online, the retail space required to cater for the luddites and those who want to shop as a hobby is well bellow our current capacity.

Arent they liable for business rates when the property lies empty ?

 

Just put the rent up...nobody innit.

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30 minutes ago, pokercola said:

Yes bit of a feeling of clutching at straws with this one, the money for nothing HPI forever risk free BTL dream is dead therefore the opportunity must exist somewhere else.  Even the article doesn't commercial property sound a good bet, and they are spinning it as hard as they can.

If BTL is dead we should see a collapse in prices circa 20-% in the next 12 months.

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Its a terrible article

Commercial is much more risky than residential in most cases, and less liquid.

For starters you have the value of the property empty and exactly the same property with a good covenant which may be worth x more.

The problem is how do you know they are going to pay and everything is a risk these days.

For example I was interested a building in a city centre 2 shops and restaurant at the bottom (let to a national chain) with a few small flats above.

50k was the rent for the restaurant with juicy business rates to match.

A year later the national restaurant chain left via CVA and now the restaurant unit is changing over tenants every year or so.

You have business rates to pay and huge voids and tenants can also say they want a few months rent free.

I doubt there are many high street brands that will not have gone/been bought or CVA in the next ten years.

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4 minutes ago, Fromage Frais said:

Its a terrible article

Commercial is much more risky than residential in most cases, and less liquid.

For starters you have the value of the property empty and exactly the same property with a good covenant which may be worth x more.

The problem is how do you know they are going to pay and everything is a risk these days.

For example I was interested a building in a city centre 2 shops and restaurant at the bottom (let to a national chain) with a few small flats above.

50k was the rent for the restaurant with juicy business rates to match.

A year later the national restaurant chain left via CVA and now the restaurant unit is changing over tenants every year or so.

You have business rates to pay and huge voids and tenants can also say they want a few months rent free.

I doubt there are many high street brands that will not have gone/been bought or CVA in the next ten years.

And you cannot leverage up.

There's no IO in commercial lending.

And the rates -as the article mentions  - are ~9%

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Hmm not sure I rate this advice.

Commercial properties in town centres (eg big shopping centres etc) are more often than not owned by large reits or similar which in turn are often owned by pension funds etc. These are often way overpriced as the value of these assets is often based on their theoretical rental yield (which is now total pie in the sky hence why so many are empty). These people are not about to sell these at a knock down price so getting a tenant to cover the kind of money you'd have to borrow is a non starter. 

As for small out of town offices etc, it's a nice idea but these spaces are pretty much being given away at the minute as they're having to compete with home offices and eBay shops so unless you can entice people in with short term let's and low low rents it's a nonstarter and if you do then bang goes your risk free investment.

If I was looking for an alternative to buy to let (which I'm not but let's talk hypothetically) I'd have a look at car parks / parking spaces. 

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1 hour ago, lardboy said:

High street retail is dead, it's all moved to indoor malls.  Sandwich shops, charity shops and bookies make up the majority of UK high streets outside of Intu and Westfield type malls.

 

and inside, it is noticeable that every shop that closes in Derby intu is replaced with a food outlet!

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5 minutes ago, Hectors House said:

and inside, it is noticeable that every shop that closes in Derby intu is replaced with a food outlet!

A combination of trading on suppliers credit and short term low rents draw them in.

 

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Hasnt commercial property been in recession for over a decade? And arent business rates about to be 'revalued' , potentially to increase significantly after being frozen for years?

Circa 2008 i worked for a chap in edinburgh who owned both a sizeable residential protfolio (circa 130 flats) and maybe 20 commercial units. All funded from the same revolving facility. 

Unfortunately every tenant going wanted a rent free period and i was aware of 6 - 9 months given rent free to encourage tenants.

The 'hook' with commercial property was that it could be put in a sipp. Going in with that very long term mentaility was the only way it made sense...and i think things have got worse since.

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I think commercial property returns are based on the ability/willingness of controlling landlords (either local or institutional) to absorb the costs of empty locations to keep their pricing up. But, there is only so far and so long that this can carry on for. It was tested in 2008 but bailed out.

 

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The other aspect with commercial property is that the lease is usually fully repairing which appeals to Landlords - no ongoing maintenance and they get a fully revamped unit back at the end. EXCEPT that the tenant will frequently liquidate the business on expiry of the lease (actually normally well before that) and the dilapidations claim becomes worthless)

Voids on commercial properties can be eye-wateringly expensive.

  

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Why can't they just invest in normal investment grade vehicles and markets?

 

Why does it have to be batsh1t mental all the time?

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1 hour ago, spyguy said:

And you cannot leverage up.

There's no IO in commercial lending.

And the rates -as the article mentions  - are ~9%

You can leverage up and 

 

33 minutes ago, regprentice said:

Hasnt commercial property been in recession for over a decade? And arent business rates about to be 'revalued' , potentially to increase significantly after being frozen for years?

Circa 2008 i worked for a chap in edinburgh who owned both a sizeable residential protfolio (circa 130 flats) and maybe 20 commercial units. All funded from the same revolving facility. 

Unfortunately every tenant going wanted a rent free period and i was aware of 6 - 9 months given rent free to encourage tenants.

The 'hook' with commercial property was that it could be put in a sipp. Going in with that very long term mentaility was the only way it made sense...and i think things have got worse since.

It was quite a fall during the recession the good stuff and London has gone up about 20% from 60% down low due to FFL and cheap rates. 

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5 minutes ago, winkie said:

Click and collect shops....no staff required.;)

Theres nobody on the tesco tills in the morning when i pop in for my daily salad. One person overseeing 10 auto tills.

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I doubt many BTL will go near residential property, carries too much of the risk of a proper business. The appeal of BTL was both the tax benefits from having a business plus knowing government would look after you because you had the identical asset to two thirds of the voting population. 

 

 

 

 

 

 

 

 

 

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4 minutes ago, nothernsoul said:

I doubt many BTL will go near residential property, carries too much of the risk of a proper business. The appeal of BTL was both the tax benefits from having a business plus knowing government would look after you because you had the identical asset to two thirds of the voting population. 

2

Yup all these cowboy BTL landlords would s*** themselves having to actually run a proper business dealing with other business owners who might know a thing or two about the law, how to use it and the cash at hand to go through the legal system.

They'd rather just leech off young people and immigrants.

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