And this guy is trying to make a living out of selling RE!

[RichardC]

Was attracted by an ad in the local paper for a $1m industrial property with a 13% ROI so I called on the agent and asked about it. It was a bit farcical while I got the paper out of my car and he then proceed to read me what it said.

When asked about the property he seemed to wonder what more I needed to know. Like "What's the catch? 13% is a high return." "No catch" I was assured it is pretty normal in that area (Tully) but he agreed to email me the details.

Read the mail this morn and first thing I saw: RAILWAY LEASE: This property is leased from Queensland Rail, with the current lease, due to expire, 10 June 2021.

Wow! I'm going to get finance on a leasehold property.

ps Is it just me or is SS very slow?

 

[GreatPig]

Can you explain what that means?

Does it mean when the lease expires QLD rail get the land back and that's the end of your $1m - in other words, the $1m is effectively just lease payments for 15 years?

Thanks.

GP

 

[RichardC]

As far as I know GP, people are happy to take out long leases on Gov land and put improvements on them. I believe they are at the whim of the Dept when it expires. Many marine businesses are on Harbour Board land eg.

I'm told the tenants have been there for 15yrs (they are quality tenants) so if the developer got a cheap 30 yr lease, (its still only $6k/y, gr rents $140k) why should he care if he has to walk away in 30 yrs? He never had to put up the original price of the freehold so it was a low cost/high return investment.

Even now I can see it might be a good invest for someone with a lazy mill: A recent super pay out eg. $122k (net, indexed) is a good return for a retiree.

My point is that he never mentioned it and that it makes it an impossible deal for me to finance.

Thommo

 

[Dazz]

Thommo,

I reckon the "experience" you just described depends totally on what you frame of reference is / what goggles you are looking at the deal with, and what bias' and preconceptions you have.

Asking a loaded question like "What's the catch ?" instantly tells the agent - who probably deals with these arrangements every day of his life, that you probably have little to no clue as to what you are enquiring about.

Those types of deals come up all the time.....not something that we would look at either, but I can't recall ever asking an agent that question.

Perhaps you went into the discussion with the wrong frame of reference and were disappointed when the supposed deal didn't fit into the box you had prepared for it beforehand.

That is, if you went in there, thinking you were going to pick up and enormous block of industrial land renting for 13% nett yield with no work to do....then perhaps it's no wonder you were a little deflated when comparing reality with your initial expectations.

If it was freehold, what return rate would you have been interested ??

Don't know the full details, only you know that....so can't comment further.