Top tips for buying a shop
Considering investing in property? A shop may not be the first thing that springs to mind but it can be a very fruitful purchase. Find out how.
Most people aspire to own a house or a flat in their lifetime, you know, a lovely little place to call your own and all that.
But have you ever considered buying commercial property? Like a shop? If you’re even a bit tempted, here’s how you can go about it.
Get the timing right
Just like everything in life, timing is very important when it comes to buying property. Do yourself a favour and get the homework all done before pressing ahead with buying.
You’ll want to think about the price of shops for sale too, the availability of stock on the market and what competition you might come across. Top tip: check out the commercial mortgage market for comparison.
What about letting? Make sure to study tenant demand closely to check that there will be demand from strong businesses. This means you’re reducing the risk of being left with a tenant struggling to pay their bills or worse, an empty shop.
Choose the location
What’s the name of that famous house-hunting show? Oh yes… location, location, location. It may be a tired old saying but it’s true.
You’ll want to find a shop where your business – or tenant, if you let the property – can thrive. Think town centres and high streets, retail parks or shopping centres.
You may also want to consider accessibility, so how easy it is for people to get to your shop. This includes staff, customers and suppliers. Similar to this is checking out transport links so be sure to explore road, train and bus routes nearby.
Otherwise, parking, noise and looking at local initiatives may be attractive if you plan to occupy the property, or are looking for ways to stimulate tenant demand.
Determine the budget
The cost of buying a shop is more than just the purchase price, of course. Stamp Duty is payable if you buy a shop worth more than £150,000 in England and Northern Ireland. Stamp Duty relief is available in certain circumstances so make sure to contact HM Revenue and Customs (HMRC) if you think you qualify.
But remember that you will need a large chunk of your budget for decorating and fitting out the premises, if you’re going to occupy it, in order to create an environment that will appeal to customers.
Other factors to build into your budget will probably include the cost of professional advice from commercial agents, solicitors and lenders.
Don’t forget that there are also ongoing costs associated with owning a shop. If you plan to let the premises, you may wish to share these costs with your tenant. They include insurance, local authority charges, repairs and maintenance, running costs and service charges, and potentially VAT.
Lastly, you should take a close look at the Energy Performance Certificate, which will show you how energy efficient the shop is and how much the energy bills might come to, as well as being aware of business rates, which will be sent out by the local council in February.
Pick the property type
What you can afford will dictate the type of property you’re after and the amount of space you require.
Look at key market trends too. For instance, click-and-collect retailing is growing significantly, so consider how this might affect your business – or your tenant’s. Will you need to buy a shop with space suitable for collection points?
Another important consideration is planning permission. The Town and Country Planning (Uses Classes) Order 1987 defines what business can take place in all commercial property.
Retail property comes under the A1 use class, which includes shops, hairdressers, travel and ticket agencies, pet shops, sandwich shops, showrooms, dry cleaners and Internet cafes.
If you plan on making changes to the shop you buy, you will need to seek planning permission. Speak with the local council and get professional advice.
Secure the finance
You will probably need to secure a commercial mortgage to buy a shop, which you should be able to get from a bank or a building society. It might also be useful to seek advice from a commercial mortgage broker.
The lender may also want to see one or more of the following:
- Business plan
- Commerical remortgage repayment plan
- Accounts and bank statements
Make an offer
Once you’ve found a shop for sale that meets all your requirements, you will need to make an offer to the vendor and negotiate a little, which is normally done via their agent.
Once the deal is done, we recommend securing a lockout agreement which will take that shop off the market. At this point, make sure you also get the offer written down for proof.
Heads of terms
It’s typical that a draft contract will be drawn up next, often known as the heads of terms. This is where you’ll need a solicitor to oversee the legal work.
At this point, it’s a good idea to conduct a local search to unearth any plans that may impact the property. You’re going to think twice about buying a shop if you discover that planning permission has been granted for a shopping centre nearby, aren’t you?
Lastly, ensure a survey is carried out to make sure that the property is in a good state. After all, you will not want to be landed with an unexpectedly big bill for repair work.
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