Swapping a two bedroom flat in London for a property in the countryside, which comes with a ready-made business on the side, can be the stuff that dreams are made of.
Our list of potential options range from a five bedroom guest house on the Isle of Skye costing £575,000 to a 21 bedroom holiday letting business in Cornwall for £1.9million and a net profit of £80,000.
But without the right research, such a venture could soon turn into a nightmare and a severe drain on your finances.
Would you swap a two bedroom flat in the city centre for a successful guest house on the Isle of Skye?
This two bedroom flat in London’s Chelsea costs £575,000 – the same as a guest house on the Isle of Skye
There are many similarities between buying a residential property and a commercial one. For example, anyone buying a commercial property will typically be required to pay a deposit when contracts are exchanged, followed by the remainder being paid when the deal completes.
There are also some similar costs, including stamp duty. But there are also additional ones for commercial purchases that may be payable, such as VAT.
The bills don’t end there for commercial buyers, with on-going costs needing to be budgeted for, including insurance, local authority charges such as waste collection, and possibly retaining a commercial property estate agent to manage the building.
One of the biggest considerations for those owning a commercial property is business rates, which are a tax on non-domestic buildings. The local council will provide the business rates bill each year.
COSTS ASSOCIATED WITH BUYING COMMERCIAL PROPERTY
Advice: you will need assistance from professionals, including a commercial estate agent, lender and solicitor
Stamp Duty Land Tax: you must pay the tax if you buy a commercial property valued at more than £150,000, the current threshold in England, Wales and Northern Ireland as Stamp Duty in Scotland has now been replaced with the Land and Buildings Transaction Tax
VAT: some commercial properties are subject to VAT
Fees associated with arranging a commercial mortgage
Decorating and refurbishing the commercial property
Buying and fitting out the space with furniture and equipment
Hiring a firm to help transport furniture and equipment
Setting up facilities, including establishing IT
Commercial mortgages are available, but these tend to be set at a higher rate and require a higher deposit than many residential deals.
High street lenders offering commercial mortgages – which would be required on a B&B – include NatWest, Santander and Lloyds.
What deposit is required on a commercial mortgage?
However, some will only lend up to 70 per cent of the value of the bricks and mortar, while other lenders will lend up to 65 per cent of the total purchase price (which includes the house as well as the value of the business).
Mark Harris, chief executive of mortgage broker SPF Private Clients, explained: ‘If you are swapping a two bed flat in London for a B&B in Scotland, the mortgage requirements will be slightly different as you will need a commercial loan rather than a residential one because you will be running a business.
‘Maximum loan-to-values on commercial borrowing tend to be lower than on residential deals and you could probably get a maximum 70 per cent loan to value on this, meaning you will need a 30 per cent deposit.
‘Commercial rates are also higher than the rock-bottom residential rates around so you can expect to pay between 4 and 5 per cent, which is still pretty competitive.
‘However, the loan-to-value and rate you can get will be subject to historic trading accounts of the business and your own business plan, as well as whether you have any experience running such a venture.
‘Most lenders will want to see evidence of some experience of working in the sector.’
Ultimately, such lending tends to be much more bespoke than residential deals as the outcome will depend on factors such as location. For example, a lender may have had a bad experience on lending on a commercial property in the area. So it may be worth examining several lending options if you require a commercial mortgage.
Here is our list of some commercial properties with businesses that are included. They offer impressive net profits of up to £180,000 a year.
1. Four-bedroom house with three main camping areas in Eskdale, Cumbria, for £1,650,000
Eskdale campsite – which comes with a stone and slate built family home – produced a net profit of £178,000 for the year to October 2015
The impressive 8.5 acre site has three camping areas with 100 pitches and 10 attractive camping pods
There is a shop and reception with a stock room and shower facilities for those staying at the campsite
2. Six-bedroom farmhouse with five holiday cottages in Bude, Cornwall, for £1.9million
The established holiday letting business comes with a detached Grade II listed period farmhouse
It is on the north Cornwall and Devon border and the indoor swimming pool boasts stunning views of the area
The business had a gross turnover of almost £170,000 for the year ending December 2015, with a net profit of just under £82,000
3. Eleven-bedroom hotel on the Isle of Skye for £725,000
The Broadford Hotel is the original home of the world famous Drambuie Liqueur, made from scotch whisky, honey, herbs and spices
It has recently been extended and refurbished – but scope for further development exists with finalised plans for an additional 18 bedrooms
There is a comfortable lounge area for seating for 15 people and a dining area with seating for 28 people
4. Seven-bedroom guest house in the Scottish Highlands for £625,000
The Sheiling guest house is a detached property on the shores of the beautiful Loch Broom
The business trades on a seasonal basis from March through to October and operates under the VAT threshold
The seven bedroom property is within a short walk of the village of Ullapool in the Scottish Highlands
5. Five-bedroom property on the Isle of Skye for £575,000
The property is in a secluded location on the North West coast of the Isle of Skye, with stunning views across the Dunvegan Loch
The luxurious accommodation has extensive glazing on the ground floor, which showcases the beautiful surroundings
The house is based on an eco-friendly and sustainable design, with three rooms to let