At what age do you plan to be financially free?

[HiEquity]

Rolf, where can I find such deals - 10% NETT yields on sub 2 mil commercial properties.

I keep looking on realcommercial.com.au but cannot find such properties.

Now we're getting to the nub of things.

Looking on realcommercial is not nearly enough. You need to get on the blower and start talking to people. Going to auctions and inspections - getting to know some agents. Put in some offers at the price you're willing to go forward with - that way the agents know that at least you're actually prepared to put pen to paper rather than just talk about it all day.

For 49 properties out of 50 you will probably find the seller has their price as advertised and won't budge, as is their right. So you move on. The fiftieth property you'll hear the agent say something along the lines of "yes, the ad says 8.5% but I reckon the owner will consider 10%".

Music to my ears...

Of course it's not going to be a 10 yr lease to the Australian govt at that price. That sort of thing seems to go at around 7%, give or take. Don't ask me why service stations and fast food joints go even lower than that - I have no idea what some buyers are thinking.

But that's the thing with commercial - you can buy whatever risk profile you like - at the corresponding price of course! While there is by definition more to gain from the higher yielding properties and more to lose from the lower yielding ones, it's the perception of "risk" that creates these opportunities.

Only you know how much more you value financial loss compared with the lack of financial gain...

 

[Ace in the Hole]

There are some small businesses/self employed contractors whose revenue income/revenues are linked to themselves and are not easily replaceable. At the risk of being labelled extreme, let me offer some examples.

A leading QC barrister in a certain area of law
A heart transplant surgeon
A professional violinist
A leading tennis player
A supermodel / movie star

Whilst you can argue that all are replaceable, the income generated by all these small business entities is related to their personal brand. The paying client/customer will not easily settle for anyone else. These self employed people / small business entities often cater for select clientele and require referral from a small customer base.

These examples are not businesses/business people.
Greg Norman plays/played pro golf, but that is not his business.

 

[wylie]

I wish we hadn't had to sell the houses we have sold over the years. We would be pulling in a lot more rent, but we had to do what we had to do...

Lost patience or "had to"..?

Definitely "had to", or should I say "chose to sell rather than take a full time job just to hold onto the IP".

I would hate to be working just to hang onto an "IP". I'd do anything to hold onto the roof over our heads though.

 

[china]

These examples are not businesses/business people.
Greg Norman plays/played pro golf, but that is not his business.

These examples are all small businesses, often sole traders. Greg's income is directly related to the golf he played. The barrister's income is related to the number of clients he represents and like other small businesses, he may employ staff, lodge tax returns/BAS, have overheads and rent,etc. At the same time, his income from his business/practice is directly related to his personal physical labour. Likewise with all the other "personal brand" related businesses. They are certainly not employees but are self employed.

 

[BayView]

but i wana retire now!

You can have my oompa-loompa!

 

[nhg]

You can have my oompa-loompa!

Aww thanks.

Ill have him replace me at work. Nobody can tell the difference!

 

[DaveM]

Aww thanks.

Ill have him replace me at work. Nobody can tell the difference!

Good stuff. I heard JWR was back.

 

[china]

I'm not sure if you can find $115k renting for $350pw....Please let me know if you do, I'd be interested!

.

What about this one?

http://www.realcommercial.com.au/property-medical+consulting-nsw-gosford-500698831?listingType=buy


I think the selling price is about 110k - 120k with a 430/wk rental yield. No renos, no waiting for rent to go up.

So what's the catch?

 

[MsAli]

What about this one?

http://www.realcommercial.com.au/property-medical+consulting-nsw-gosford-500698831?listingType=buy


I think the selling price is about 110k - 120k with a 430/wk rental yield. No renos, no waiting for rent to go up.

So what's the catch?

China, I know very little about Commercial. I'd be keen to know the answers. However from the face of it, the ad says "READY TO GO PREMISES", which to me means it's vacant. How long will it take to find a tenant?

Further, from what I've heard on SS, Gosford doesn't have a great CG reputation historically? But as many would say, who cares if the numbers work....

Interested to know other point of views!

 

[cimbom]

$200/week body corporate?

 

[starter]

The catch is that it's not tenanted o you have to research the rental market to see how hard it would be to rent. The other thing is that I think it's a gross figure.

Fwiw I just settled on a cip in Tamworth at 310k returning 585 net per week on a 3 year lease. So those deals are out there.

 

[Deltaberry]

I know nothing about Gosford.

But the first question you should ask yourself is, who is paying $430/week? Why would any one pay that? Why take that spot? Why not rent another spot? What business would possibly go there? Can it survive at $430/week? Why not just run it out of my garage? If there's a tenant, again can he survive? When does the lease expire? Will he leave? If he left who would want to take it? Would you?

 

[nhg]

The catch is that it's not tenanted o you have to research the rental market to see how hard it would be to rent. The other thing is that I think it's a gross figure.

Fwiw I just settled on a cip in Tamworth at 310k returning 585 net per week on a 3 year lease. So those deals are out there.

On Peel St?

 

[Angel]

What about this one?

http://www.realcommercial.com.au/property-medical+consulting-nsw-gosford-500698831?listingType=buy


I think the selling price is about 110k - 120k with a 430/wk rental yield. No renos, no waiting for rent to go up.

So what's the catch?

Rates $1,600pa; body corporate $10,400pa

 

[JIT]

What about this one?

http://www.realcommercial.com.au/property-medical+consulting-nsw-gosford-500698831?listingType=buy


I think the selling price is about 110k - 120k with a 430/wk rental yield. No renos, no waiting for rent to go up.

So what's the catch?

Umm... it's probably vacant and returning a 0% yield!

Usually (but not always) when they quote "for sale at x or lease at y", it's vacant or about to become vacant, or has the option to become vacant.

 

[Ed Barton]

What about this one?

http://www.realcommercial.com.au/property-medical+consulting-nsw-gosford-500698831?listingType=buy


I think the selling price is about 110k - 120k with a 430/wk rental yield. No renos, no waiting for rent to go up.

So what's the catch?

Apart from the massive BC fees others have pointed out the asking price is $150k plus tip. What makes you think the price is $110 - 120k?

 

[china]

Apart from the massive BC fees others have pointed out the asking price is $150k plus tip. What makes you think the price is $110 - 120k?

From phone discussions with the agent.

 

[DaveM]

China have you considered looking for residential property in comercial areas and getting DA to convert to commercial use eg medical centre, accountant, xray etc etc.

I believe there to be good returns to be made with something like this from a returns point of view, plus with the ability to convert back to resi in the future, growth would track with resi in the suburb and not with commercial which can be pretty flat line.

 

[china]

China have you considered looking for residential property in comercial areas and getting DA to convert to commercial use eg medical centre, accountant, xray etc etc.

I believe there to be good returns to be made with something like this from a returns point of view, plus with the ability to convert back to resi in the future, growth would track with resi in the suburb and not with commercial which can be pretty flat line.

I have considered this but getting DA/ then engaging builders is too much outside my field of expertise and requires far too much active effort. I am looking for passive returns.

In the example above in the Gosford area, you can purchase the unit above for 120k and have 430/wk return. There are high BC fees.

To do a development on the same street, it would cost 300k to purchase an old knock down residential house and then to convert to medical centre including DA/builders etc would cost an additional 700k. This would probably yield 1000/wk gross rent.

So the sums are not in favour of development in this area.

 

[DaveM]

I have considered this but getting DA/ then engaging builders is too much outside my field of expertise and requires far too much active effort. I am looking for passive returns.

I have done DA's before, they are relatively low cost and you can get a consultant to do the DA and plans if dont want to put any effort into it. Though the higher the effort the higher the gain.

In the example above in the Gosford area, you can purchase the unit above for 120k and have 430/wk return. There are high BC fees.

It is empty so the rental is nothing per week. Is $430 pw gross or net lease? How long has it been vacant for? It could take a year or two to lease and then at a discount.

So say its advertised at 22k gross and ends up renting at 18k gross. Less 13k in outgoings, another 1k in insurances, you end up with 4k in your hand each year, which on 120k purchase price is pretty rubbish.

To do a development on the same street, it would cost 300k to purchase an old knock down residential house and then to convert to medical centre including DA/builders etc would cost an additional 700k. This would probably yield 1000/wk gross rent.

The tenant pays for their own fitout in commercial, or at most you may contribute to it via rent free period, so why would you spend $700k on a fitout on a 300k house? Given many doctors surgeries I have been in, they are just some plasterboard partition walls with doors, and mostly free standing furniture. About the most complex part of the fitout is installing a sink in each room.

I am not talking knocking down the house and building a Taj Mahal medical centre, I am talking buying an existing 4br house with suitable zoning and parking and converting it internally.