Can we sell with 8% Yield

Hi all

We told the agent we want to put in a good tenant with a good lease, wait and then sell.

As mentioned in a previous thread the property is 125 office + 125 Workshop + 1050m industrial land in Kurri kurri (Hunter Valley / west of Newcastle)

When asked what we want we said about $26,000 pa + gst + outgoings
From previous values we estimate a sale price of $350,000 + gst
Which would give the buyer a 7.4% yield

Agent said we could try and lease for $30,000 pa and an investor would be looking for at least 9.0% pa yield

If we could manage to get say $28,500 pa in rent the sale price with a 9.0% yield would come down to about $316,000, which we think is to cheap:confused:

The numbers are not adding up for me or is the 9.0% just to high for our property considering the land size to office and workshop size etc?

He did suggest it would suit an owner occupier and going to auction.
We have had an offer to buy from a neighbour about 6mths ago just below the $350k

Hope my numbers are ok

Thanks again everyone for your opinions and advice Ironlady
 
Hi all

We told the agent we want to put in a good tenant with a good lease, wait and then sell.

As mentioned in a previous thread the property is 125 office + 125 Workshop + 1050m industrial land in Kurri kurri (Hunter Valley / west of Newcastle)

When asked what we want we said about $26,000 pa + gst + outgoings
From previous values we estimate a sale price of $350,000 + gst
Which would give the buyer a 7.4% yield

Agent said we could try and lease for $30,000 pa and an investor would be looking for at least 9.0% pa yield

If we could manage to get say $28,500 pa in rent the sale price with a 9.0% yield would come down to about $316,000, which we think is to cheap:confused:

The numbers are not adding up for me or is the 9.0% just to high for our property considering the land size to office and workshop size etc?

He did suggest it would suit an owner occupier and going to auction.
We have had an offer to buy from a neighbour about 6mths ago just below the $350k

Hope my numbers are ok

Thanks again everyone for your opinions and advice Ironlady
That's the only problem with "Value",it's what other people perceive it to be,just wanted to ask what was the price you paided from the start,because the 350k offer if solid in six months may be good rather the worry about what happened inbetween..imho..
 
Hi Willair

We paid $22,500 close to 20yrs ago (Cant remember exact date)
Built about 13 yrs ago but has taken years to finish. Cost for materials over $100,000

Thanks Ironlady
 
the lease needs to be near market, otherwise the whole thing falls down since the valuer will smell the above market lease and value accordingly

ta
rolf
 
Yes I'm hearing you Rolf.
We have another agent coming out to have a look.
He is not from here but is only 15 min away. I don't think we can get any one closer (commercial that is)
Not sure how many agents We should invite to look at the property, even though we are only listing with one agent.


Thanks Ironlady
 
Is your neighbour still interested? Even if you drop a couple of $ from the initial $350k offer you are still achieving more than if you went through the listing & sale process with an agency.
 
Hi Scott

He could be but He never made a firm offer at the time.No harm to ask to put down his best offer if still interested. I will get some more values from agents for now (rent or sell).

If we have to we can rent it out for 3 yrs or so if we can find a good tenant. It may work out ok for us to to do that.

Were not being forced to sell we want to use the money for other investments other than commercial property. We may have to change our ideas on what we want to do.

I would be ok with a sale price close to the 350k mark but we had a previous value round 400k and my wife is not budging from that at the moment. Maybe some more valuations might change that.

Sorry for the mixed story
I better go and do some work
Thanks Ironlady
 
I would be ok with a sale price close to the 350k mark but we had a previous value round 400k and my wife is not budging from that at the moment..

Dear Mr Ironlady,

Your neighbour will be eyeing off your block for the extra elbow room. The yield that the place would provide if it was rented is irrelevant to them.

Every other potential purchaser is interested in the yield, unless they are a small owner operator, in which case they'll be squeezing you down as hard as they can.

I suggest opening up a decent dialogue with the neighbour in an appropriate manner, devoid of all agent and broker interference.

Your wife not budging may prove, as is normally the case, the biggest problem.
 
Thanks Dazz for the advice.
I don't think anything exciting will happen but I'll keep yous posted

Thanks again everyone Ironlady
 
Hi Johno

As far as paying rates to council they are saying 150k.

Nothing small or similar at the moment but there has been land for sale now and then. Most of the land for sale is normally bigger than ours (1050).
There's not much vacant small land left in our street and a few bigger lots that are occupied.
I think there is a larger lot for sale around the corner listed with a local agent, but I cant find it on realcommercial.com

I think there is more upside to our property because:
- Lack of supply in our street
- Future infrastructure as in the exstension of the Newcastle link that
will be finished late this yr (2-3 min access from a major freeway from F3 and Newcastle to the other side of Branxton)
- Were located right in town

Johno is LJH Commercial in our area from Newcastle and do they look at small stuff like ours. (sorry should have asked earlier)

Thanks Ironlady
 
Ironlady,

What are the larger lots within close proximity to yours selling as a $/sqm figure?

Lack of supply is certainly a good thing, and will work in your favour if/when selling.

I don't believe there is a LJH Commercial office close to Newcastle; looking on RealCommercial, it seems there are a few prominent agents such as Knight Frank, Colliers and Raine and Horne Commercial. Often the one with the most listings is the most active in the area (ie they do more marketing, they know more buyers/sellers etc) so I would be talking to the 2 or 3 which have the greatest market share and who you think market properties well. Calling them to enquire about a property will give you a very good idea of how they operate.

Often you will get a better result with one agent working exclusively on your property to achieve the best result for you; however, it is not out of the question for you to ask a couple different agents to work on your property on an 'open agency' basis.

However, keep in mind that only the agent which sells your property will get paid, so often agents are reluctant to work on properties on this basis as they can work for months on your property and then end up not getting paid a cent, and actually lose thousands of dollars. Some agents will push you to accept low offers when they're on an 'open' agency because they want to sell it and get paid before the other agents do the deal.

I suggest you pick the most capable agent who understands your needs and work closely with them on an exclusive basis to get you the best result.

Jonno
 
Iron Lady - I'll second what JonnoM has said. Find one agent and go with them exclusively. You commit to them, they'll commit to you. Otherwise 'every man and his dog' will try to put a sign out the front, rightly or wrongly the market will cheapen the value of the property and it won't be about those agents being dedicated to securing you a sale as much as having signage in their patch.

Dazz is right - yield most likely means nothing to the neighbour - go and have a genuine direct chat to them, tell him/her if he is interested then he has until X date to put an offer in. Inform them if they haven't formalised their interest by that date then you are proceeding to either lease or sell.

Talk to your chosen agent about the appetite on both a vacant possession and tenanted basis. If he thinks there are a few owner occupiers out there or a speculative investor who will take it on a VP basis then you may have a chance to sell it as is. In which case, maybe consider going to the market formally via Auction, and if you do go down this path then whatever you do don't under-promote it. Make sure your agent knows how to run an Auction properly.

The added advantage of this is that if your neighbour has any lingering interest they will be forced to participate in the Auction process or else face missing out, and in most cases this achieves a higher result. I've personally seen this occur in 3 Auctions I've been involved in, 2 sold to the adjoining owners (1 before Auction) and the third to the sitting tenant. At the last one the neighbour just turned up to the Auction unannounced after indicating he had no interest and was the highest bidder.
 
Thanks for the help everyone.

I looked at some other properties in Kurri Kurri / Weston (next to Kurri)

1. Kurri - $450,000 - 1500sqm - vacant old house - light industrial - undeveloped - slope away from main road.

2. Weston - 375,000 - 843sqm - main road traffic one way only - undeveloped - B4 mixed use - small shed with office - used as small car yard

There is some bigger undeveloped land in the same block as ours for sale. I'll try and find out some prices.

Also there is a couple of large industrial properties for sale in Weston but I think they are way to big to compare.

The neighbour that made the tenative offer owns the property across the road. He leases it to various mobile crane owner operators. I not sure on the details but I think there is more than one business.

I heard on the grape vine that one of my neighbours who's property joins our side boundary with a different street front was eye balling our property as well.

They may be tire kickers or wan't it cheap but I will find out.
I need do do more research to get a better idea of what our property is worth before I talk to them (neighbours).

I don't want to p off the agents but would it hurt to put a for sale sign out before We put it the agents hands to see who else might be interested. Pull it down if we go with an agent.
Ironlady
 
I don't want to p off the agents but would it hurt to put a for sale sign out before We put it the agents hands to see who else might be interested. Pull it down if we go with an agent.
Ironlady
Depends... Do you want to try save ~3% sales commission to risk selling 5-10% cheaper? Or 20% cheaper because you didn't gain the attention of all parties which would have been interested in the property?

The agent might know of a party/parties who have been looking to buy exactly what you've got for months, or even years, and would accordingly pay top dollar to secure your lot.

Also, when people deal directly with owners they will almost always screw the owner. So you'll get 3% (or more) less anyway because they know you're saving on agent's fees.

In a very small town it might not be a bad idea though as everyone will know each other and the buyer almost always comes from the local area. But again, they will try to screw you on price dealing directly with you anyway, so I'd recommend going through an agent.

Good luck :)
 
Yes I have to agree Jonno. If we deal with only one or two people or so, we are possibly taking the competition away. At the end of the day when we put it with an agent and they are not interested any more (neighbour) because they dont want to pay the agent fee, they dont want it bad enough. As I think I said they just want it cheap.

We have contacted 4 agents and asked are they interested. One came out the other three ?
The agent who came out was very helpfull (thanks).

Thanks for the help everyone
Ironlady
 
Yes I have to agree Jonno. If we deal with only one or two people or so, we are possibly taking the competition away. At the end of the day when we put it with an agent and they are not interested any more (neighbour) because they dont want to pay the agent fee, they dont want it bad enough. As I think I said they just want it cheap.

I'm sorry, you've lost me - why would dealing with an agent make a difference to the buyer? They don't have to pay the agent's commission; however, they will most likely pay a higher price due to more competition and/or the agent's negotiating skills.
 
Hi all

We decided to try and put a tenant in to our property at Kurri Kurri using a sole agent from Newcastle.
It has taken a while ( approx 4mths on market ) but we have a tenant in as follows.
2yrs at $25,000 pa + out goings + GST. With out goings $33,000 pa + GST.

Sorry about the lack of absence on the forum. We have been moving and chasing work as handy man / cleaners. Renovating on top of that as well.

Thanks Ironlady
 
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