Balanced Solutions/Financial Planners

[dharris]

Hi,
on the weekend I spent a few hours with a company called Balanced Solutions (dodgy?!). This company sits you down & looks at your situation, uses the PIA software to calculate cash-flows etc then suggests some properties in your price range & based on their real estate "research" (strong growth areas etc).
The results were that we purchase a commercial office space in a Melb suburb for 220K, which has rent guaranteed for 1 year, and has tenants for 2 years. The rent is $275/week which results in a positive cash flow. All sounds too good to be true eh?!
I'm thinking that I'm definitely paying top dollar for this property, so maybe If I go directly to the developer (Asia Pacific) it would be cheaper, but then I would have to find the tenant.
The Balanced Solutions "financial adviser" also organises all the finances etc, which of course you pay for. Could anyone recommend a good real estate financial adviser in Melb?
Advice please!

[Macca]

Hi DHarris,

return on commercial RE is always higher than residential. In my experience you should be getting 10% nett on first floor office space. Suburban first floor office space that is not brand new can be VERY hard to rent. It has been known to be empty for years.

With residential you can drop your rent $10 or $20 per week and you will find some one, with commercial you can drop it $50 and still not get a tenant.

Ground floor retail is much easier to rent, but should still be returning a minimum of 8% nett after all expenses.

If you can't cope financially with the repayments for at least 6 months be extra careful, as once the existing tenants lease expires you could be empty for a year.

EG. I had 2 commercial renters. one on a 5 year lease, he took his option for another 5, same tenant for 10 years returning 10.5%+ , fantastic.
The other had a tenant for 2 years, then empty for 3 years,
Commercial can be tricky.
Regards
Macca

[ruk]

banks will usually only lend on 50% of valuation on commercial property, because of the extra risk