For many property investors, residential property often feels the safer choice, so it is consequently the most common, particularly among first-time buyers. However, semi-commercial properties are growing in popularity among savvy investors.
Investing in semi-commercial properties provides an opportunity to diversify portfolios. A semi-commercial building combines commercial and residential elements, presenting dual-income potential. Residential tenants provide stable, shorter-term rental income, while commercial tenants are often locked into longer leases and offer more security.
The UK’s recent increase in the stamp duty charge (effective 1 April 2025) has further enhanced the financial attractiveness of investing in semi-commercial property. In the following hypothetical example, we’ve crunched the numbers to illustrate:
Example: Purchase at £300,000, 25% deposit, interest-only
“Market-leading 5-year rate” found on Money Supermarket: 3.83% fixed for 5 years – £718 per month
Valuation fee: £100
Lender legals: £500 (estimate)
Product fee @ 3% – £6,750
Client legals: £2,500 (estimate)
Stamp duty: £20,000
TOTAL FEES: £29,850
RENT PER MONTH: £1,300
RENT VS REPAYMENT: £582
General rate in the market: 7% fixed for 5 years – £1,312 per month
Valuation fee: £1,000 (estimate)
Lender legals: £1,250 (estimate)
Product fee @ 2%: £4,500
Client legals: £5,000 (estimate)
Stamp duty: £4,500
TOTAL FEES: £16,250
RENT PER MONTH: £2,350
RENT VS REPAYMENT: £1,038
While valuation and legal costs are higher for semi-commercial purchases, the stamp duty makes semi-commercial buys the lower-cost option. Also, although interest rates on the loan are greater, the net rent is more favourable.
Securing mortgages for semi-commercial properties is more specialist than standard buy-to-let properties. However, in our experience, semi-commercial finance applications are more human-assessed than number-driven. This factor means we can discuss a bespoke transaction with a real person and get the outcome our clients need, rather than face a “computer says no” scenario.
In conclusion, semi-commercial (depending on your circumstances) could be the way forward if you’re looking to expand or diversify your property portfolio.
Whatever your property investment decisions, we always recommend using a broker with the knowledge, contacts and expertise to secure the essential finance. Please get in touch if you’re expanding your portfolio and would like us to help you achieve your goals.
