If you have found yourself hunting down buy-to-lets, holiday rentals or HMO’s, it can be easy to overlook the opportunities that you pass by everyday with mixed use property. Opportunities that, as we shall see, have entirely unique benefits. Not too sure what mixed use property is? Read on as we shall uncover the key features and benefits to spark your interest.
What is a mixed use property?
Mixed use property is any property that combines commercial and residential properties within a single title deed. The most common examples will be the shops with flats above that line many high streets up and down the country. However mixed use properties are also large residential developments with access to a commercial gym, pubs with an upstairs living area or even a holiday park with a domestic dwelling on thy land.
Opportunity is all around you
Opening your eyes to the possibilities of commercial property will allow you to see the opportunities that you have probably passed by dozens of times. That shop on the corner that has been empty for a while now or the one with the flat above that has been used as a storeroom for years. You are not the only one who wants them to be put to good use.
The ways in which the nation’s shopping habits have changed over the years has made the high street an increasingly challenging territory in which to run a business. Having not gone unnoticed, the government has implemented schemes to rejuvenate the high street and incentivise property investors to bring commercial premises back into use. It is now easier than ever to be granted planning for converting commercial properties into residential or mixed use, but of course this is not the only benefit.
Why invest in a mixed use property
Few things are certain in property investing, and as we have seen, it is difficult to predict what lies around the corner. Therefore, many property investors have considered diversifying their portfolio. Having a mixture of property uses, even within a single building as with mixed use, can be help to support your overall cashflow if one of the tenants is struggling. Commercial tenancies agreements will be longer than residential ones, while the residential portion of the building is more likely to gain capital growth.
Security can also be found through the a mixed use property’s location. A retail premises will generally be most desirable in a popular area for visitors, especially one with residential properties in close proximity. This may also attract residential tenants who wish to be closer to amenities and seek a central location.
There are also cost benefits associated with a mixed use property. Buying the entire property as a single commercial unit can bring certain tax advantages. It is also important to know that with most commercial leases, the tenant will be responsible for repairing and insuring their portion of the property. The final benefit is that while many property investors will be searching for buy-to-lets, holiday rentals and HMO’s, you may be able to bag profitable deals that are being missed by others. There are a few drawbacks to consider however.
Commercial property will attract certain costs above a traditional buy-to-let, the main one being lending. Commercial mortgages on the whole will have a higher interest rate than a buy-to-let mortgage, so factor this into your calculations. The loan to value will also be lower meaning you may require a larger lump sum for the deposit. In addition there are fewer lenders in the market providing finance for a mixed use properties.
The second consideration involves buildings insurance. Insurance companies will naturally be more nervous about insuring a residential property about a commercial property. Depending on the nature of the business, it may not be a problem, but is worth bearing in mind.
Thirdly, more attention may need to be placed on the tenant dynamics. For example, having a shift worker living above a business that makes noise throughout the day will not be a sustainable or enjoyable experience for the residential tenant.
A final note
Mixed use property is an amazing opportunity that can be an extra tool in your box or your main strategy for creating a diverse, income generating portfolio. Additional legal and tax implications will need to be understood so it is important to gain the knowledge before getting stuck in. The opportunities are out there, every day. It is simply a case of gaining the knowledge and implementing it.