If you’re thinking about purchasing your first commercial property or business premises, then there are a few things that you will need to know and consider beforehand.

To note first of all, any property or piece of land that is currently being, or will be used for commercial or business purposes, is considered a commercial property. This also includes mixed-use properties, for example a shop with a flat above.

Financing your purchase

Unless you have the cash available, you will need some kind of finance facility to fund your commercial property purchase.

The most common method for this is a commercial mortgage.

A commercial mortgage can be used to purchase a property for your own business to use, which is known as an owner-occupied commercial mortgage.

They can also be used to purchase a commercial property and then rent it out to another business to use, which is known as commercial buy to let. You can also use a commercial mortgage to purchase residential buy-to-lets, although these are more commonly used by professional landlords with large property portfolios in place of buy to let mortgages.

A commercial mortgage is a long-term facility with terms of up to 30 years available. Like a traditional mortgage, a deposit is required and then you make monthly repayments.

To get an understanding of how much a commercial mortgage might cost, you can use an online commercial mortgage calculator.

The stamp duty

You will need to pay Stamp Duty Land Tax when you purchase a commercial property, but the bandings are different to the residential and buy-to-let bandings.

The bandings are different for England, Wales, Scotland and Northern Ireland.

As an example, the bandings for England and Northern Ireland are:

Up to £150,000 Stamp Duty Land Tax (SDLT) is 0%
The proportion between £150,000 and £250,000 SDLT is 2%
The proportion over £250,000 SDLT is 5%

It’s very important to allow for this when you’re setting your budget.

However, you may not need to pay Stamp Duty if you’re purchasing a Limited Company that already owns the property, rather than the property itself.

When you buy a company, you will also be buying everything that the company owns, including any properties that are in the company’s name. As the company will have paid the Stamp Duty when they initially purchased the property, you will not need to.

Make sure you’re looking at the right types of property

The term ‘commercial property’ covers anything from a small office space to warehouses and factories. You need to have a thorough business plan so you know what kind of space you need.

If your business is already up and running, then you’ll have a better understanding of what you are looking for. If you’re only just setting up your business, then you may need to do some additional research.

You may not want to buy a property that is too small and doesn’t allow you to expand, but you also don’t want to purchase a property that is far too big, and therefore more expensive than you need it to be. Remember business rates will be higher for larger properties.

Look at some of your competitors and see how they’re operating and what kind of space they use. This should give you an idea of what works.

Location, location, location

As will all property purchases, finding a good location should be top priority.

Some of the things that you should consider when choosing your location are:

Your customers

One of the most important factors to consider is where your customers are. Does your business rely on passing trade, or will customer seek you out directly? Also, will you have clients coming to the premises frequently for meetings, or do you work with clients remotely? These are things to think about when you’re looking at sizes and also the image that you want to portray.

Accessibility

If you have clients come to you regularly, then you need to ensure that your location is accessible. You need to think of your staff too – choosing a more central location will mean that there are more transport links. However, if you tend to deal with clients over the phone, then a more remote location may be a better and more cost-effective solution.

Your competitors

When you’re looking at a particular area, have a scout around to see what the competition is like. If that area is already saturated with businesses offering similar services or products, then you may struggle for customers unless you are offering something a bit special or moving to an area with a good reputation for your chosen product or service.

Keep your future goals in mind

When you’re viewing commercial properties, you need to keep your future goals in mind too. If you want to expand in the future, can this property be flexible and modified over the years to suit your business?

It’s important to find a balance between affordability and flexibility.