Commercial + residential

[Big Tone]

I had a look at a commercial property today for 250k that also has a two bed unit above total rent is $400/wk but the real estate has stated that the current rentals are under market and suggest the another $100/wk is obtainable.

I am hoping to get some advice or info from anybody who has or had a similiar investment that could give me the pros and cons.............

Thanks

Regards

Big tone

 

[Rob Williams]

I like it. On paper, it stacks up as a good deal. Healthy yield, even at, say $450pw. I don't know what it looks like or what the area it's in is like, but from the info you have provided. I'd be looking at it seriously.

 

[Dazz]

Hi Big Tone,


I've never been involved with one of these before, so i cannot offer any direct feedback. What I could suggest though, is to look at the following ;

1. Check the zoning. What is it exactly.
2. Lease length term on the comm. stuff.
3. Outgoings break up - how is it divvied up amongst the tenants ??
4. Finance rates - are you going to be pushed to higher comm rates on the lot ??
5. Future possibilities for the prop...anything going for it ??

 

[asdf]

Problem with these is that the businesses in the shop part sometimes don't stay on as long as you'd like. 2x2 is on paper only and the bargaining chip as a landlord is a lot less than say an industrial or large commercial when you can shift all the costs on to lessee.

Judging by the yield and price, looks like its probably out in the country too isn't it? I would be adding 2-3% yield loading on my numbers to compensate for the added risk.

 

[Big Tone]

Problem with these is that the businesses in the shop part sometimes don't stay on as long as you'd like. 2x2 is on paper only and the bargaining chip as a landlord is a lot less than say an industrial or large commercial when you can shift all the costs on to lessee.

Judging by the yield and price, looks like its probably out in the country too isn't it? I would be adding 2-3% yield loading on my numbers to compensate for the added risk.

It is about a 1 hr drive from sydney! It took me today 1 hr and 7 min from Sydney nth beaches
The shop has been tennanted for five years and they wish to stay but are on
an expired lease (month to month basis), where as the resi is also on a month to month but he also said to me that he wishes to stay on.

 

[Big Tone]

I like it. On paper, it stacks up as a good deal. Healthy yield, even at, say $450pw. I don't know what it looks like or what the area it's in is like, but from the info you have provided. I'd be looking at it seriously.

The area is just okay.....
It is located in a little group of community/suburb shops which include a chemist,newsagent,hairdressers,bakery,take away,chinese restaurant, close to train (about 1k), local primary and high schools (public) child care and bus stop is located at front of shops, the REA is actually pushing to get rid of the shop tennant as he feels he would be able to replace them within 6-12 weeks at a much better return if they were not too happy, also surrounded by alot of "retirement communities".

 

[pulse]

The devil is in the detail. Two month by month leases aren't inspiring. The quality of the tenant is important. I bought a shop and two flats for $185 000. The shop was a charity and not paying mush rent. I was keen to get rid of them initially.

In retrospect I'm glad I kept them. They are really tolerant of renovations etc whereas businesses aren't. They are also run by volunteers and have been in various buildings for 35 years straight... Only expenses are electricity, my rent and insurance.

In short they are a great tenant.

Details to look for:
1. outgoings- can expensive if not covered by tenant as they should be. Rates are steep as is insurance. Easy to get to $6K a year. With a small shop half the rent might go on this.
2. Tenant quality - the value of comm lies in the tenant not in the building, Buying with a view to kick them out is a bad move. If you kick them out the building immediately looses value.
3. Finance - comm is about 1% higher than resi and discounts not as readily available.

Anyway a small comm is a good way to learn a lot fast

Cheers
Pulse

 

[jaycee]

Please steer me to "make a new topic" if htis takes the original important topic of course, but just wanted to ask a question or 2 on comm properties at this sort of price range.

Much discussion on SS has been on higher priced property, even when the talk has disgressed to "under $1m" - anything in this, or jsut the fact that there may be more higher priced ones around ? Why one wants a property (and where, I live in Perth) may sway this.. I would be looking for another prop to add with minimal hold costs to help me obtain yet another later on... With only 1 ip under mybelt and a PPOR I dont want to live in forever, I figure this prop investing thingy may be a way of getting somewhere.....

Why this price range ? ATM, I have $220k equity in my PPOR & IP (that would take the LVR to 80% across both properties)...

From a bank.legal/finance point of view, can I use this $220k and buy a $200k commercial property ? (I can apparently use ito for a boat/4WD/round the world trip, so I cant see why not, but this won't be the first nor the last time I find out something I didn't know)

So I am looking at conservative lending and mindful of higher holding costs & my own servicability as purchase price goes up. So curious if this may be a "no go" type of zone for any reasons etc


Tone, love the yield mate....

 

[Strannik]

I have a property on the main road, directly opposite local shopping center.
Now recently i saw an ad in a local paper, advertising a property for sale, which is a resi house with council approved surgeon's office inside. Annual rental - over 40k

This got me thinking. Why not do the same to my property? Doing a major reno and allowing for the area which can be easily converted to business premises? For example - raising the house, setting up 1 large room downstairs which can be then divided into few rooms by tenants should they wish to use it as business premises?

Has anyone done similar sort of thing?