Commercial property yielding 10%

A mate is offloading his commercial IP & offered it to me - I'm not interested, but it seemed like a reasonable deal.

It's a grocery store in a small town within reach of Sydney - population 2500. The tenant is 2 years into a 10+5+5+5 lease.

It yields 10% on the asking price of $900K. with increases annually at CPI. All outgoings are paid by the tenant, so the 10% is nett.

The established grocery is the main one in the town, it's weekly turnover is $55K-$65K so seems like a business that is unlikely to disappear in hard times.

Is 10% yield increasing at CPI reasonable in todays environment ?
 
For a town that possibly has no cap growth and the land obviously has no development potential (since its leased out) it's probably reasonable, but I'd still tread carefully. More importantly you also need to determine if the rent is reasonable because if its not, come market review, it could be revised down. If you accept that and were purely after yield, there are other 10% yielding things I've come across also
 
Could be some extra scope for a creative deal in this situation depending on the needs of the seller? They might not need a traditional settlement, easier to work these things out when dealing direct with the vendor.
 
Could be some extra scope for a creative deal in this situation depending on the needs of the seller? They might not need a traditional settlement, easier to work these things out when dealing direct with the vendor.
Hi Andrew, I think there is always scope for creativity. He offered me a tempting creative deal.

Sounds good Keith. Are you able to share more specifically the location?
Hi belleran, Oberon. It has a little mining, a local billionaire at Mayfield, wood chip factory, farming and a reasonable number of tourists/hobby farmers.

Happy to PM you contact details.

Cheers,

Keith
 
Seems to be this one.

http://www.oberonfirstnational.com....propertyID=1858623&realestate=Oberon_NSW_2787

There is a large looking IGA just across and up the road a bit.

Mind you I don't see how a IGA store can also be a Mitre 10 store. Certainly doesn't look like it on Google.

I would need to get a feel for the place 'on the ground' to see how this stacks up against the IGA.

Bottom line all the returns and all the personal guarantees don't help you if they go belly up.

Cheers
 
Would those be CIPs as well?
Yea CIPs. Also a function of higher interest cost.

If it's an IGA/Mitre 10, I don't see why not. Albeit you'd have to note that the person selling it could've been part of the original subdivision/development group and yields 35%+.
 
Yea CIPs. Also a function of higher interest cost.

If it's an IGA/Mitre 10, I don't see why not. Albeit you'd have to note that the person selling it could've been part of the original subdivision/development group and yields 35%+.
Hi Delta

It's not the IGA/Mitre 10. The one for sale is the much smaller (appears) and no doubt older super market across the road from the IGA.

Cheers
 
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