Historically, getting any type of mortgage for a property above a commercial address has proved tricky. But does that mean buying this type of property is a non-starter or is it worth seeking a lender who offers these types of mortgages? Here, we look at the pros and cons of owning a buy-to-let property above a commercial address so you have the information needed to decide if it’s the right move for you.
What is a commercial address?
A commercial address refers to a property used for business purposes, including shops, offices, restaurants, warehouses, hotels and service centres. The primary goal of this type of space is to facilitate commercial activities, whether it’s selling products or offering services.
The design, layout and amenities of commercial premises are usually tailored to meet the specific needs of businesses and their clientele. Their location – often in urban areas or business districts – plays a central role in determining their commercial viability and value.
It’s quite common to find homes located above commercial addresses, especially in cities and built-up areas. Many of these are even used for buy-to-let, with the landlord renting out the property to a tenant.
Even if a flat isn’t located directly above a commercial address – eg, it’s several stories higher – it’s often still classed as such. For instance, the apartment might be on the 11th floor or a purpose-built block but the commercial property sits at the bottom of the development. In this scenario, the flat is still considered above commercial premises. As a result, these types of apartments can be quite common.
General characteristics of a property above a commercial address are new builds – with the developer planning both residential and commercial space – or older, Victorian-era buildings which just so happen to sit above a shop. Again, you will find most of these properties in cities and built-up areas, where there are more high streets. However, it’s still possible to find them in quieter, more rural locations.
If you’re thinking about purchasing a buy-to-let property above a commercial address, the first aspect to consider is demand. Do tenants enjoy living above commercial addresses, or will these properties be harder to let out?
Some may have no issues, regardless of the type of commercial property that sits below. Others may be fine with retail stores but not restaurants or food shops due to smells of the food potentially coming into the property.
A tenant in a property several floors above a commercial address is less likely to care about the commercial property than if they were located directly above it. Ultimately, it depends on the tenant and their preferences.
What are the pros of letting a property above a commercial address?
Buy-to-let properties above commercial addresses can present unique opportunities for landlords in the UK, offering a blend of benefits that can make them an appealing investment option. Let’s take a look at some pros:
Pro | Reason |
Appeal to a diverse tenant base | Owning a buy-to-let property above a commercial address can attract a broader range of tenants, especially young professionals who might not mind the noise of living above a commercial address. |
Location advantages | These properties often sit in central locations, providing tenants with easy access to amenities, public transport and the busy life of a city. Such features can make them highly desirable for those who want to be close to work, shopping, dining, and entertainment. |
Potential for competitive rental yields | Given their position and appeal, especially in prime urban locations, these properties can sometimes command higher rents. The combination of location and accessibility can translate into attractive rental yields for landlords. |
80 LTV mortgages
- Borrow up to 80% of the property’s value
- Get a mortgage as an individual or limited company
- An online mortgage application that takes place entirely online.
What are the cons of letting a property above a commercial address?
Navigating the challenges of a buy-to-let property above commercial addresses requires a well-informed approach. While it has its advantages, there may also be some drawbacks.
Con | Reason |
Mortgage approval challenges | Securing a mortgage for a buy-to-let property above a commercial space can be a hurdle. Some lenders view these properties as higher risk, leading to hesitancy in approval. It’s not uncommon for some lenders to avoid lending for residential properties above commercial premises. |
Noise and privacy concerns | Tenants may face potential noise disruptions, especially if the commercial entity below has extended operating hours or is a nightlife spot, leading to disturbances during unsocial hours. |
Maintenance considerations | Increased wear and tear or structural issues could arise due to the commercial operation below, indirectly affecting the residential space. This dual nature can complicate maintenance schedules and responsibilities. |
Impact of commercial vacancies | The viability of the commercial entity below impacts the property’s overall appeal. If the business faces financial difficulties or shuts down, it might reduce the attractiveness of the residential units above, potentially leading to longer void periods or reduced rental income. |
Should I buy a property above a commercial address?
It’s rare for landlords to look specifically for properties above commercial businesses, especially with the potential borrowing headaches involved. However, these homes can be appealing to tenant’s that want to live right in the heart of the action. Therefore, they have their advantages.
Whether or not you buy a property above a commercial address with the intention of letting it out comes down to your own needs and what you’re looking for in a buy-to-let. If you believe it to be a good investment and want to get a buy-to-let mortgage, the next step is to find a lender that can help.
Buy-to-let mortgages for properties above a commercial address with Molo
At Molo we lend to landlords who want to purchase a buy-to-let property above a commercial address. If, however, it’s located directly above the commercial premises, we will need to review applications case-by-case.
Find out more about our buy-to-let mortgages and see how much you can borrow.
Buy-to-let mortgages for properties above a commercial address with Molo
At Molo we lend to landlords who want to purchase a buy-to-let property above a commercial address. If, however, it’s located directly above the commercial premises, we will need to review applications case-by-case.
Find out more about our buy-to-let mortgages and see how much you can borrow.
80 LTV mortgages
- Borrow up to 80% of the property’s value
- Get a mortgage as an individual or limited company
- An online mortgage application that takes place entirely online.
