Semi-commercial opportunities boosting residential landlord returns – Octopus

by: Steve Matthews, head of buy to let at Octopus Property
  • 27/09/2018
  • 0
Semi-commercial opportunities boosting residential landlord returns – Octopus
Buy-to-let landlords have faced a combination of challenges over the last two years with high property prices and rising interest rates, leading some to look at the profitability of their properties.


But for those with a strategic, long-term approach plenty of opportunities remain such as semi-commercial investments, with greater numbers considering this approach.

Investment in semi-commercial has many of the characteristics of a typical buy-to-let investment, and as lenders become more comfortable with this asset class, products available have also become similar to standard buy-to-let products.

Semi-commercial property is a great way for landlords to aim to maximise profits and offers a way forward in this environment.

It is an especially attractive proposition as, along with commercial property, it is not subject to the raised stamp duty charges.

Meanwhile the tax burden is eased as the commercial part of the property is exempt from the deduction on mortgage tax relief.

Landlords operating in this area can look to benefit from multiple income streams with the potential for successful semi-commercial investments to be lucrative.

A further degree of security comes from helping to cover any residential rental voids as tenants as commercial leases are typically for longer periods of between three and ten years.


Permitted development rights

The commercial aspect itself also offers plenty of scope.

Landlords can give plans careful consideration at the point when a company moves on from its tenancy and other firms are entering an area or already meeting a given level of demand.

The right business tenant, in the right location, can boost the long-term rental prospects of a semi-commercial investment.

There are also opportunities offered by permitted development rights. This allows landlords to take the commercial part of their investment back to residential usage without having to follow full planning permissions.

For landlords investing in semi-commercial in secondary and tertiary locations, the ability to exercise this right creates further potential.


Do not underestimate

Moving from residential to semi-commercial is not going to be a seamless transition and landlords taking this route have to be sure they are comfortable with semi-commercial as an asset class.

Taking advice on planned investments is imperative while having insight into commercial requirements is essential.

Varying classifications on property usage, along with regulations including health and safety, will all form part of the decision making.

Ultimately, it is important not to underestimate some of the differences with semi-commercial – an area of buy-to-let that is very much its own specialism.

But with buy-to-let lenders reporting an increase in transactions of this type, it’s clear many landlords are keen to take on semi-commercial.


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