Folks,
wondering if you can share some pointers/questions I should ask as I run a high-level ruler over a CIP that has been waved under my nose?
- Capital city fringe
- Under 100m2 unit
- Rents at $500/m2. Tenants pay outgoings.
- Current asking price would be around 8.2-8.3% nett return by my calculations. Would obviously be negotiating price and terms, so this could look a bit better, but I doubt it would hit 9%.
- No lease yet, I presume this would be up to me to organise, market and negotiate with potential tenants.
- Professional office space in brand new building. Only 4 other tenants all larger than 110m2, less than 190m2.
- Strata title (Could be community title from the, which I didn't know existed in CIP)
- Very trendy area with zero vacancies.
- Excellent transport options. Multiple modes.
- Lots of parking. Both dedicated and shared. Unit has 2 dedicated spots
- 3 story building. Unit is on the ground floor.
- Other tenants are all owner occupiers. I don't know what type of businesses they are yet.
- Clearly this is the last unit to go. Ground floor, smallest.
- Foot traffic would be low I reckon. It is 100m from the main foot traffic area. So you would have to know it is there to go to it.
- There really isn't any land available to do this type of development. So probably not likely to be any competing space in the same area for a few years.
Questions;
Is this just the wrong type of CIP to start with? I don't have the capital for the $1M+ purchases.
Is the yield too low to bother? Or is 8.3% for a first foray worth it?
What sort of due diligence questions should I be asking now to reveal the major risks?
How smart is it to negotiate a long (3-5 month) settlement while I work on bringing in a tenant? I recall some talk of getting the tenant in, getting it revalued because it is worth more with the tenant signed up. And then rinse/repeat.
Certainly not smitten with this and am ready to walk away at the drop of a hat. More curious to see where it leads in terms of learning. I foresee CIP in my future somewhere.
Ta,
EV
wondering if you can share some pointers/questions I should ask as I run a high-level ruler over a CIP that has been waved under my nose?
- Capital city fringe
- Under 100m2 unit
- Rents at $500/m2. Tenants pay outgoings.
- Current asking price would be around 8.2-8.3% nett return by my calculations. Would obviously be negotiating price and terms, so this could look a bit better, but I doubt it would hit 9%.
- No lease yet, I presume this would be up to me to organise, market and negotiate with potential tenants.
- Professional office space in brand new building. Only 4 other tenants all larger than 110m2, less than 190m2.
- Strata title (Could be community title from the, which I didn't know existed in CIP)
- Very trendy area with zero vacancies.
- Excellent transport options. Multiple modes.
- Lots of parking. Both dedicated and shared. Unit has 2 dedicated spots
- 3 story building. Unit is on the ground floor.
- Other tenants are all owner occupiers. I don't know what type of businesses they are yet.
- Clearly this is the last unit to go. Ground floor, smallest.
- Foot traffic would be low I reckon. It is 100m from the main foot traffic area. So you would have to know it is there to go to it.
- There really isn't any land available to do this type of development. So probably not likely to be any competing space in the same area for a few years.
Questions;
Is this just the wrong type of CIP to start with? I don't have the capital for the $1M+ purchases.
Is the yield too low to bother? Or is 8.3% for a first foray worth it?
What sort of due diligence questions should I be asking now to reveal the major risks?
How smart is it to negotiate a long (3-5 month) settlement while I work on bringing in a tenant? I recall some talk of getting the tenant in, getting it revalued because it is worth more with the tenant signed up. And then rinse/repeat.
Certainly not smitten with this and am ready to walk away at the drop of a hat. More curious to see where it leads in terms of learning. I foresee CIP in my future somewhere.
Ta,
EV