Town centre apartment – above commercial units

THE QUESTION

I have found a high street property with great fundamentals and a very healthy rental yield.  

It is in a very impressive listed (grade 2) building with 10 flats.   On the ground floor are two commercial properties - a Sainsbury’s local and a major bank.   

The flat I am looking at is on the third floor of this building with windows facing onto the high street (double glazing in the bedroom). 

Should I be concerned about being above commercial in this situation?  Obviously being right in the centre of town provides good fundamentals, but is there likely to be a problem being above these commercial businesses? 

My strategy is long term - however I obviously am looking at potential sale in future and don't want to limit my market. 

THE ANSWER

It is impossible not to limit your options on this property. A significant number of BTL lenders will decline to lend on flats above commercial.   This is simply because, as always, they have the end game in mind; if they have to repossess and offload this type of property there will be a reduced number of interested buyers compared to a similar flat in a residential block. Where some buyers see the central position as an advantage, others will see noise and all the activities of a busy high street as undesirable.

Of the reduced number of lenders prepared to offer you a mortgage on this type of property, that reduced choice will be reduced further by the presence of Sainsbury’s below as it will have at least two of the ‘nasties’ that lenders really hate:

• Unsocial opening hours i.e. not the usual 9 to 5
• Sale of alcohol

Add to that a possibly third ‘nasty’ of storage of inflammable goods.

So can you get a mortgage on this?  Yes you can. Will you have a wide choice of lenders? No you won’t.

The good yield is typical of this type of property because the restrictions mentioned above will prohibit it commanding the same price as an identical flat in a residential block.

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