How to Choose and Buy a Shop in 10 Simple Steps
If you have aspirations of starting up your own retail business, choosing the right commercial property for your shop is critical to your success.
Here at FC Funding we have provided this simple 10 step guide to help you choose and buy the right shop for your retail business.
Why you should buy your shop
If you have the resources, purchasing your shop has considerable advantages than renting one. We believe the key benefits are that:
Mortgage rates are relatively low
Mortgage rates are relatively low these days, compared to what you’d pay monthly in rent.
You have control of your property
When you purchase your property outright, you retain control of the premises. This is opposed to renting, where you’re subject to your landlord’s direction – they can raise the cost of rent or even sell the building altogether.
How to choose and buy the right shop
Whilst you could go just ahead and find a shop online and purchase, we think you’re better off working through these 10 simple steps.
Step 1: Decide on the type of shop you want to open
First and foremost, you should look into your business’ objectives and goals – what do you want to sell? And how will you differentiate your products and services from the competition?
We recommend devising a mission statement or business plan as it will help outline your business’s vision, and in turn will help you choose the right premises for your shop.
Step 2: Decide on your budget
As you’re probably aware, the cost of buying a shop extends to more than just the purchase price. So when it comes to working out your budget you should also factor in:
Which is payable should your purchase a shop that costs more than £150,000 (in England and Northern Ireland)
Commercial and legal costs
You will also incur additional expenses when seeking out professional advice from solicitors, lenders and commercial agents.
It’s well worth checking the Energy Performance Certificate of a potential property to learn its energy efficiency to help you approximate your energy costs.
Once you’ve purchased your shop, you’ll want to be mindful of how much it will cost to run the property. What’s more, if you intend to let the premises, you can look to split these costs with your tenants. These costs include insurance, local authority charges (like council tax and business rates), repairs, maintenance, service charges and potentially VAT.
Step 3: Do your research beforehand
When it comes to buying a property, it’s all about timing. Having crafted your business plan, we advise conducting research beforehand before your commit to buying a shop.
We advise looking into the current price of shops on the market, their availability and any potential competition from other prospective buyers.
Step 4: Decide on the property type
Having conducted research, you’ll have gained an understanding on the types of properties available within your specified budget. Deciding on the type of property you choose for your shop will be dependent on:
What you will sell in your shop
What you intend on selling will heavily influence the type of property you purchase. For example, there’s a rapid rise in click-and-collect retailing, and these types of shops require the sufficient space for collection points.
You should consider any relevant planning permission requirements. Class A1 of The Town and Country Planning (Use Classes) Order 1987 defines the purposes of a shop. Should you wish to make any changes to your shop, you will need to seek planning permission. You should speak with the local council and obtain professional advice to understand the viability, associated costs and timeframes of your proposed changes.
Step 5: Decide on the location
Choosing the right location is a key determinant to your shop’s success. You’ll want to find a location where your business can thrive. This could be at a busier location with regular foot traffic, high streets, town centres, shopping centres or retail parks.
It’s also worth assessing the commuter and transport routes as you will want your staff, customers and suppliers to have easy access to and from your shop. Similarly, you may want to check if there are parking facilities around your shop to aid accessibility.
You should also consider any deterrents that may divert customers away from your shop, such as unwanted noise in the vicinity.
Step 6: Choose the shop
Having worked to assess all options available to you, factoring in your business needs, the property type and location, you are well placed to choose your commercial premises.
Step 7: Perform due diligence
It’s worth checking over the property, as well as any potential plans that may have an impact on your decision to buy. For instance, you may find out that a new shopping centre will be built nearby.
We also recommend conducting a survey to assess the state of the property, as you won’t want any unexpected repair costs following your purchase.
Step 8: Secure the finance
You will need a commercial mortgage to buy a shop, which is where FC Funding come in. With our years of experience, not to mention our considerable expertise in commercial mortgages and lending, we can find the best commercial mortgage deal for your shop.
Typically, we will want to see a business plan, a commercial mortgage repayment plan and your accounts and bank statements to get an idea of your business’ proposed liquidity and profitability.
Step 9: Make an offer
Having secured the finance, you can make and negotiate an offer to the vendor and their agent. Once a deal has been agreed, we suggest securing a lockout agreement which will take the shop off the market. You can also enquire for written proof of purchase.
Step 10: Work through the head of terms
The head of terms is a draft contract which will then be drawn up and worked through. This will be done by a solicitor who will assist by overseeing all legal work associated with your purchase.
FC Funding: specialists in commercial property finance
FC Funding are experts in commercial mortgages, buy to let mortgages / bridging loans and investment mortgages, with years of experience in all areas of commercial lending and facilities.
Thanks to our extensive knowledge of the financial sector, we can assess the commercial mortgage options available to you, so that you choose the most suitable product for your business.