Effects of having a vacant property?

[tubs]

Hi,

I've been looking more and more at commercial but I'm still seeing plenty of vacant properties around.

Has anyone here had a property that's been vacant for a few weeks or more and what kind of impact did it have on you? Did it affect you financially? Did it cause problems at home (bit of a worry). I know vacant residential properties usually rent out reasonably quickly but commercial properties can take a LOT longer and I want to know what I might be in for.

Thanks!

 

[Bird Dog]

Hi,

Has anyone here had a property that's been vacant for a few weeks or more

Ahh.. you may want to be a little more specific Tubs as that would pretty much cover just about every CIP owner I know..

The very reason you ask about this and it's impacts leads me to believe that CIP is not for you.
The nature of CIP lends itself to long tenancy but also (but not always) slightly longer vacancy.

Interestingly, we purchased our vacant CIP across town at the same time a house became vacant on our street (middle SE Melb suburb) and they both took about 3 months to rent so even resi is not always beer and skittles..

If a long (a few weeks as you put it) vacancy bothers you, it might be better to stick to resi..

Good luck

B.D

 

[Macca]

I had one vacant for 15 months once.

Front unit, reduced rent to same as the ones down the back, free set up period, etc etc finally sold it to next door who wanted to expand.

Move on Macca

 

[Scott No Mates]

I dream of having a property which would lease up in just a few weeks. At best I expect 3-6 months (including incentives) at worst 15-18 months. Just grin and bear it. Unlike residential, there is no emotional attachment for tenants only financial considerations, if it doesn't suit, it just sits and languishes.

 

[redwing]

I dream of having a property which would lease up in just a few weeks. At best I expect 3-6 months (including incentives) at worst 15-18 months.

Just grin and bear it. Unlike residential, there is no emotional attachment for tenants only financial considerations, if it doesn't suit, it just sits and languishes.

Until it's rented or you go bust?

Is it a momentum based strategy to cover your a$$ets?

 

[Kristine..]

Hi, I've been looking more and more at commercial but I'm still seeing plenty of vacant properties around. Has anyone here had a property that's been vacant for a few weeks or more and what kind of impact did it have on you? Did it affect you financially? Did it cause problems at home (bit of a worry). I know vacant residential properties usually rent out reasonably quickly but commercial properties can take a LOT longer and I want to know what I might be in for. Thanks![/QUOTE]

G'Day tubs

Yep! Got a prime position main street shopfront vacant - been empty since January and it's now November.

At not getting $2,646 pcm plus outgoings that is now just about $30,000 that we have had to find from general housekeeping so far this year.

If retail is still vacant now - in the lead up to Christmas - then it's likely to be vacant for another six months until people assess Christmas trade figures and start to make plans for 2012.

Hey, we are too old, salty and long in the tooth to take vacancies out on each other. That's a young person's game! We just trudge about making up the payments and not letting it get to us.

Commercial property investments may sound glamorous, but when the market is off the boil it is seriously off the boil. We have owned this property since mid 1997 and it has never been vacant before. It's not just the rent, it's the start up capital and the operating costs of a new business that people are not confident about.

However, when a commercial property is vacant it has no assessable value. Commercial property is calculated on the capitalised rate of the rent income. Most commercial lending - if secured against the commercial property - still works on the loan = lease formula.

It is only because banks can take residential security and lend for commercial property that borrowers end up with 30 year loans for the investment.

So if you are looking at getting into commercial, then now, while the market is on the floor is sometimes a good time to get into a position which will rebound later.

When we are back in the next prosperity cycle, and tenants are clamouring for office / retain / industrial / storage space, you might find yourself priced out of the market.

Right now, vacant property is a whole lot cheaper than a properly tenanted property, but the cost of that cheapness is no rent.

Cheers
Kristine

 

[Scott No Mates]

Quite succinctly put - what you don't pay for now (in the slump) you pay for in the lack of rent.

 

[Aaron_C]

Commercial property investment is the ultimate counter-cyclical play. If a recession/downturn strikes, rents go down and capitalisation rates go up. This means a double whammy for commercial property values, but it's hard to purchase during this time because commercial rates are high and banks are reluctant to lend on them.

But when the boom times arrives, rents go up, capitalisation rates fall so you get a massive multiplier effect on your commercial property value. People pay 3-4% yield for prime Melbourne CBD shops...imagine if you bought it 15 years ago for a 7% yield? It's just amazing how much money there is to be made in this area if you buy well..

 

[Aaron Sice]

what worries me more is the disposal of what could be seen as an "(inactive) asset" by the ATO.....

 

[DEC]

been empty since January and it's now November.

that is now just about $30,000 that we have had to find from general housekeeping so far this year.

Thanks for the honesty Kristine
This is not a side you hear much of in the usual commercial talk here.

 

[DEC]

what worries me more is the disposal of what could be seen as an "(inactive) asset" by the ATO.....

Whats the issue with the ATO there?

 

[Scott No Mates]

The commercial property buyer is generally more astute than a residential investor, they are aware of the tax implications and would be aware that they will have to pay gst on top of the sales price unless the property was tenanted.