Roma Finance, the specialist bridging finance lender, are providing an increasing number of loans to landlords moving into semi-commercial property in order to tax-protect their portfolios.

Roma have seen a 50% increase in enquiries in the last six months with many going to completion or in the pipeline, indicating a move by landlords to diversify their portfolios.

Mixed-use property is exempt from some of the tax increases coming into force from 1st April, and those landlords and property developers who are looking to diversify their portfolios are snapping up such units to offset stamp duty tax hikes.

For example, a £500,000 residential buy to let property would incur stamp duty of £30,000, whereas for a commercial or semi-commercial property of the same value the stamp duty would be just £14,000.

There are other benefits to mixed-use property for the investor too, including having two types of property in one, so being able to let them to different types of tenant and having the opportunity to sell either to a different set of buyers.

Rental yields can also be higher and Roma Finance have seen customers’ projects deliver double the yield compared to purely residential investment.

Popular mixed-use property Roma have recently lent on includes a retail or workshop unit with flats above, and pubs with a residential house attached.

In order to maximise the income and offset tax, there is often renovation works required, mainly to make the separate units fit for purpose and to put in separate entrances to each part of the building.   Bridging loans can be provided in stages as the work progresses and the exit for the bridge is often the sale of one of the units, while the other is retained for ongoing rental income.

Scott Marshall, managing director at Roma Finance, commented: “We’re seeing many landlords looking to diversify their portfolios and some are investing in semi-commercial units for the first time. They are keen to take advantage of tax efficient property types and also have another string to their bow when it comes spreading tax risk.

“With a retail unit and a residential flat above, they are getting longer tenancies for the shop and good rental prices for the flat. We’ve funded conversions where separate entrances have been created for the different parts of the property and occasionally the exit route for the bridging loan has been to sell one of the units and retain the other.

“Landlords and property investors are putting in place a variety of strategies to protect their portfolios from increasing taxation and semi-commercial property has a definite role to play in this as they look for new opportunities.”

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