Buying Commercial as PPOR?

M

MrSco

Hi All,

I've been a member and reader for some time but this is my first post and am hoping for some sage advice and food for thought on my current investing plans...

I'm looking at buying my first property and have primarily been looking at Residential properties for either a PPOR or IP (+rent). I'm really open to any option just has to be the right buy on either livability or profitability.

I'm based in Sydney and have mostly been looking in the inner west for 2 bedroom semi's and terraces around retail hubs near train lines. I feel like I'm priced out of this market when prices for 2 bedroom semi's non brick go for 820 out at croydon on small blocks....

I have now been pondering the idea of commercial properties for residential + commercial use. ie those terraces or houses with shopfronts in the small retail hubs near train stations on on small main roads.

Is buying commercial property for the use of PPOR a good idea? What things do I really need to consider? And what things do I need to factor in when comparing the costs of a similar commercial property to a residential one (evaluating value)?

Speaking with real estate agents there seems to be alot of interest in them but from people that are not pre approved for commercial loans, I also feel that these types of properties would have alot of interest from residential renters in the future.

I'd be wanting to live there for around 10 years before purchasing a house as PPOR and hoping that this investment would gain significant capital to either sell or leverage for the PPOR if there were strong rental demands when I moved out.

Thanks for any pointers and your general thoughts on this type of investment!
 
Yep finance is a problem... As soon as the banks even have a faint whiff of commercial, they will want you to have minimum 30% deposit + fees.
 
Alright, would be wanting to avoid LMI on PPOR anyway but I definitely don't have 30% right now although it wouldn't take too long...

With 30% how do these type of buildings look as investments for the use as PPOR?

Sounds like I may be better off with 3 IPs @ 90% LVR then something like this?

Is that what guys are thinking?

Cheers
 
My point about LMI was more-so to do with your target resale market. If you are in FHB land then ability to get LMI is critical since FHBs have low deposits. If you are talking $4m stuff then obviously these people don't need LMI and it is not important.
 
Commercial buildings often lack the basic amenities required for residential use ie no kitchen or shower/bath, inadequate natural light or ventilation, built to non-habitable standards, zoning preventing living on site, possibility of soil contamination, likelihood of pcb contamination, loose & bonded asbestos etc.

A recent sale in Summer Hill was over $1m and being an ex-workshop, soil contamination was very likely.
 
Hiya MrSco,
Besides the obvious 30 min - 35% dep + costs could you add value by partitoning(student accomo)extending,building on top etc later down the track if finances permit?You might see more gain in 10yrs of residence than the average punter would.
Numbers might be better rather than 3 resi's but only you know.
Cheers Spades.
 
MrSco, ..... We bought this property (see attachment photo) late last year to convert into a PPOR.

This property was originally a suburban shop and then for the last 30 years a photographic studio with residential extension added on at a later date. It was on the market for a long time as no one could see the potential to add value.

I was bored of renovating houses and went hunting for something different ... It could still be used as a commercial premises as it has dual use approval. It would be ideal for an an accountant, lawyer or financial planner, or antique shop etc.

It needs work internally and externally to bring it up to date (mainly kitchen/bathroom). Bonus 1, is that we can convert it from 2 bedrooms to 4 bedroom quite easily whilst adding value as we go without too much effort.

Bonus 2, is that it has dual street frontage (the back yard fronts onto a street as well). We have had discussions through a building designer with council and they have no issues with us developing a second 2 bed, 2 bath, double garage on the rear of the property facing the back street (We have submitted a DA application with council and the outcome is looking favourable).

The loan was a standard resi bank loan, .... I didn't mention anything to the bank about it's former life and they didn't ask.

Many of the other posts have raised valid issues regarding shop/PPOR and associated problems (see Scott No Mates and Aaron_C posts), but sometimes the deal is viable. Look at possible opportunities closely and look for hidden value adding. These types of properties can sometimes offer some good opportunities.

Mystery

Existing Front.jpg
 
mystery said:
The loan was a standard resi bank loan, .... I didn't mention anything to the bank about it's former life and they didn't ask.
Click to expand...

Argh,i should have tried that one with the banks when i was looking at a mixed use prop a couple mnths ago.
 
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