Purchasing a commerical unit

[blazesoftware]

Hi,

I'm looking to purchase a small commercial unit for the purpose of leasing. Can anyone offer any advice of best way to go about things in relkation to financing it and about what I can write off against income from it etc.

I currently have a small amount left on my house. Say 40K and value of 400K. I want to borrow about €230. What are my best options. I hear its to have the interest match the rental as closely as possible or something like that. Also what else can I offset against my costs.

I've been told by my solicitor that it will be about €1500 plus VAT for him to do all the paper work for the purchase. Is that a reasonable amount.

If you have any specific questions that will help you answer please let me know. Thanks.

 

[jayoirl]

Hi blazesoftware,

If you looking to buy a commercial property as distinct from a private property you actually may be better off buying this throught a company. The reason for this is commercial entities ltd co. are controlled via shares and to sell a commercial property held in a ltd co you simply need to sell the share which attracts less stamp duty.

With regard to purchasing property in a Ltd. co there are pros and cons with this (most of the time people shy away from the idea without fully understanding the tax implications).

Pros - selling the property simply involves selling the share. More attractive to potential purchasers

Cons - Audited accounts. Undistributed income charges, etc. Liquidation charges (if you're going that way).

Both options involve 20% CGT.

Personally I have bought a commercial property in an investment company that I receive rent into. Because of surcharges, etc I subsidise my income out of this company to minimise surcharges, etc. When I decided to sell I'll simply sell the share and pay CGT on the share.

I am sure there's more elements to it, just cannot think of it right now.

BTW €1,500 + VAT sound ok to me.

FYI - I've been though this before you can find some more detail here:

 

[blazesoftware]

I've read in a few places though that a company isnt the way to go. I guess maybe if I was just buying it and selling it on but I plan to lease it out and hold onto it as part of my pension so from what I can gather purchasing direct is the best way to go. I'm really keen to know about deductions, Stamp duty, reclaiming expenses etc. I deally when comple the unit will be leased with the lease holder paying the fitout costs etc. Its for retail by the way.

Thanks

 

[jayoirl]

Well if you're going to buy it personally then the fact its a commercial property I don't see it being any different from a regular property.

I suppose the key thing would be the whole VAT element. If you are going to buy it new personally and lease it personally consider registering for VAT. That way you can reclaim the VAT on the purchase but you will have to charge VAT on rental income. This normally isn't a problem for commercial properties as most occupiers are businesses and they claim the VAT on their rent also.

As for regards writing off stuff, you'll have to pay stamp duty at Investor rates (depends on purchase price) and all solicitor fees, etc (but again you can claim back VAT if registered on these fees). Once the place has been purchased you will receive the rent, pay all expenses associated with the place first and then pay tax at 42% and PRSI. So I suppose that's your write off, but as such it's not a tax reducing method.

You'll also be able to write some other bits and pieces off as depreciation but this is something like 2% and won't make or break you. The bulk of the "write offs" will happen before tax.