Adelaide Commercial

[marcus.ladelle]

Hey Guys/Girls

This is my first post, but also my first foray into Commercial Property. I'm interested in your thoughts on this. My lender requires 35% deposit, remainder @ 7.25%. The ad says 9% return which isn't too bad, but I don't know Adelaide well enough to know if this is a viable location etc.

http://noagent.com.au/homedetails/2...th-Australia-Australia-5044/general?page_id=2

It appears to be close to the city/ocean etc, but i've been burnt before buying residential on 'popular opinion' of an area.

Any thoughts/advice/comments would be much appreciated.

Marcus

 

[Wandering]

Marcus,

The location is quite good. Although you linked to a 'No Agent' type website it looks to be now listed with an agent I have had a few dealings with in the past. He's always been decent to deal with if that's of any reassurance to you.

The location gets plenty of vehicle traffic past it and I would think the area would have fairly good demand from tenants should it become vacant.

Interesting the wording in your link, and that of the new agent, how it talks about plenty of options to be reconfigured. Makes me wonder about the stability of the current leases. Anyway, just do the normal checks that have been talked about plenty of times in this forum like lease conditions, how close to renewal etc. Speak to the agent first, he'll fill in a few of the blanks from the ad.

 

[marcus.ladelle]

Hi Wandering

Thank you for your response! I have spoken with the agent and he has confirmed there are 3 years remaining.

Is a 9% return common on Commercial in Adelaide? I've always been aware of 7.5 & 8% around in Commercial, but 9% seems too good to be true.

 

[Wandering]

9% is pretty good in Adelaide with main road frontage and it's a decent amount of land. May as well grab the one next door while you're at it. Ask Garry how much the one on the southern side sold for. Might help you establish a price to go in at.

 

[Aaron_C]

Cashflow positive is good as long as the tenant is a good one.

 

[Nemo30]

Brighton Road is a major arterial to the southern suburbs.

They are in the process of duplicating the southern expressway which is likely to have an affect on the amount of commuter traffic going past.

 

[kum yin lau]

Hi there, find out the current rent & try to make a determination as to whether the rent is sustainable by the present tenants.

With commercial property, the rent is apt to increase greatly through rent reviews & CPI and at the end of a long lease, the total rent becomes unaffordable by the same tenants so they look for cheaper locations.

If you can gauge the turnover, that gives you an idea of how much rent they can afford.

KY

 

[marcus.ladelle]

Thank you for your responses!

I'm stretched to pay $1.3m right now, let along buying next door... Which is why I need to be certain this is wise! Like i've said, it seems like a great investment, unfortunately for me, it's this alone for the next 5+ years or a number of smaller moves. If CBA passes on this 0.25% it will make life a little easier too!

Good point on sustainability from the businesses standpoint, i'll do my research as best I can.

Aaron, Cashflow positive is a great position, and a rare one!

Nemo, thats good info too. As I noted, i'm not familiar with Adelaide. This may necessitate a trip down there! Anything else about that area? High levels of vacancy etc? Long term vacancy?

 

[hobo-jo]

Bit odd that one advert bosts net income over $126,000 and the other says over $100,000: http://www.realcommercial.com.au/property-showrooms+bulky+goods-sa-somerton+park-500133401

I go past a strip of new commercial quite regularly on Brighton Road and they have had lease signs up for a good 6+ months on some of them (although a fairly different type of property to the one you are considering): http://www.realcommercial.com.au/property-offices-sa-brighton-5737047

 

[APerry]

Hey Guys/Girls

This is my first post, but also my first foray into Commercial Property. I'm interested in your thoughts on this. My lender requires 35% deposit, remainder @ 7.25%. The ad says 9% return which isn't too bad, but I don't know Adelaide well enough to know if this is a viable location etc.

http://noagent.com.au/homedetails/2...th-Australia-Australia-5044/general?page_id=2

It appears to be close to the city/ocean etc, but i've been burnt before buying residential on 'popular opinion' of an area.

Any thoughts/advice/comments would be much appreciated.

Marcus

Hi Marcus,

You should be able to get up to 75% leverage on this purchase and probably at a better rate than you have been quoted.

Regards
Alistair

 

[marcus.ladelle]

Thank you again for your feedback.

I'm shattered though as a valuation on another property has come back lower than expected (surprise, surprise!) and i'm now short of the required capital.

The agent has said the vendor would accept $1.2m as well.

Ah well, hopefully there's something else out there with a similar return at a price that's within my range!

Thank you guys for all your help, i'm on the lookout for another opportunity!

Marcus

 

[starter]

Should give him a low ball offer anyway, who knows what could happen.

 

[Crabnet]

They will be putting bike lanes both sides of Brighton Rd in the near future, banning car parking in the morning and afternoon, so off street parking will be essential if prospective tenants rely on customers who travel by car.

 

[Scott No Mates]

Thank you again for your feedback.

I'm shattered though as a valuation on another property has come back lower than expected (surprise, surprise!) and i'm now short of the required capital.
Marcus

Just being a little creative here, set up your own SMSF, as well as a unit trust (or whatever is required) and use your super to buy the premises in conjunction with yourself. Later on start transferring units across to your superfund.