In the last 18 months, we have seen an enormous increase in our clients using their SIPPs to purchase Commercial Property. Whether that be their own business premises, a piece of land to develop or because it’s an alternative to investing in the market.
BUT I have also noticed some advisers are still unaware of the options available to their clients when it comes to purchasing a commercial property. We offer Syndicated Purchase, for between 2 or more SIPPs, and Joint Purchase, between a SIPP (or SIPPs) and an external party. Both options maximise the clients buying power either by enabling clients to purchase a property previously outside of their budget, or by improving their own business premises. Equally, they can facilitate building a commercial property on a piece of land that they may not have been able to fund personally.
Just the other week, an adviser and I were having coffee whilst discussing a client whose pension was valued at £350,000; he also owned his business premises outside of the pension, which was valued at £1million. At first glance, this might look impossible and the question “how can he raise an additional £650k+ to buy the property with his pension?” comes to mind. However, I mentioned that we could purchase a share of his business premises with his SIPP, using what we call “Joint Purchase”.
Joint Purchase works by allowing the client to borrow 50% of his SIPP value, increasing his buying maximum to £525,000. Therefore, if he purchased £500,000, (leaving surplus for stamp duty and legal fees), he would own 50% of his property within his SIPP.
The benefit of doing this is that £500,000 would be realised to the client. On top of this, 50% of the market rent would now be paid to the SIPP, and the property value within the SIPP will grow free of any CGT liability. Moreover, the client has the option to purchase more of his business premises, once cash has built up from rent and potential contributions.
So, it might be worth getting in touch with us if your client has a pension (regardless of the value) and either has a business premises or wishes to invest in commercial property and we can help find a solution.
Business Development Manager