October and November are shaping up to be some of the busiest months for property deals in a long time. It seems like the market is back in full swing. We are going to look at one of the commercial property deals that exchanged this week.
In a recent exchange, I secured the commercial units at 22 Broad Street in Bath after years of effort. My solicitor, Nishita, and I have been working on this deal since 2015, and it’s finally happening. We’ll complete the purchase within the next 28 days, and I couldn’t be more excited.
Here’s the outline of this deal: I’m buying the freehold of the two commercial units for £200,000, with £23,500 of rental income. This translates to an impressive 11.75% yield – a significant win for me. Keep in mind that I’m a special purchaser, and this deal isn’t something that would typically hit the open market. A valuation of £260,000 further supports this purchase, allowing me to borrow 100% through investor financing. In the next nine months, I can remortgage at £260,000, enabling me to release approximately £182,000. Although I’ll need to invest £23,500 back into the deal, I plan to secure a new mortgage on another commercial property in the portfolio to cover it. If that doesn’t go as planned, I’m actively saving for the £23,500, ensuring everything will work out as intended.
Despite some setbacks, I’m thrilled to have control over the building and look forward to getting the roof and service charges in order. However, during the exchange negotiations, the seller’s solicitors raised concerns about the service charge for the property, creating more complexity. The situation is far from ideal, and I might end up losing about £1,000 in the process, not to mention the £10,000 spent on legal fees for the long-running dispute. This year, I may not make any profit on my property portfolio in my own name due to these legal costs – a bitter pill to swallow.
As I look forward to the coming months and more potential deals, it’s clear that the commercial property market is alive and full of opportunities. It may take some hard work and a bit of risk, but the rewards can be substantial in the end. So, keep an eye on the auctions, do your due diligence, and don’t be afraid to tackle the challenges – that’s where the real deals are made.
PS Did you see our blog last week on what commercial property can be used for? If not you can read it here.