The Rise of the Semi-Commercial Landlord

The buy to let market continues to demonstrate its resilience, but landlords are actively looking at how they can strengthen their portfolios. With a greater focus on cashflow, diversification and long-term stability, many of those investors are broadening their horizons beyond traditional residential property. Semi commercial property is emerging as an increasingly compelling option for those looking to build on the solid foundations of a conventional buy to let portfolio.

National Residential Landlords Association research from last year suggests a growing appetite among landlords for commercial and mixed-use property. With 40% of their landlord members saying they have either bought or are considering buying commercial property of some form.

Yield is a significant factor. According to Savills research, mixed-use currently generates a median gross yield of 9.2%, with returns ranging from 7% at the lower end to more than 11% at the top of the market. By comparison, the average gross yield on a standard buy to let is currently 5.8%, according to Zoopla.

Another attraction is that semi commercial assets benefit from two income streams, one from the residential premises and the other from the commercial unit. That not only boosts the headline yield but also provides a degree of resilience if one of the units is vacant.

In a higher-rate environment, that combination of strong cashflow and built-in diversification is a compelling proposition.

That said, a semi commercial property does require a different approach. Landlords must carefully assess the strength of commercial demand locally, the balance between residential and commercial space. They also need to consider tenant quality, lease terms, void risks on commercial units and ongoing management requirements. For that reason, due diligence on a mixed-use asset demands more time and scrutiny than a straightforward residential investment.

To support brokers and their clients in accessing this growing market, Keystone has launched its first semi commercial mortgage range. They offer two and five year fixed rates that are available for purchase and remortgage as well as lending up to £2 million across a wide range of property and borrower types.

For an increasing number of landlords, semi commercial is becoming an increasingly important part of their portfolios and our new range is built to support them.