Fees commercial vs residential

What can I expect fee wise when getting involved in commercial property as opposed to residential? Are rates the same? Or is there extra due to being commercial? Insurances? Is there a general rule of thumb? TIA
 
Commercial, fees, water, power, rates, council

Thanks for the quick reply. Is there anything that I can not expect to have reimbursed?
 
Thanks for the quick reply. Is there anything that I can not expect to have reimbursed?
Nothing and everything. Some CIPs can organise for the tenant to pay everything - others pay virtually nothing. Some of this is regulated by Retail acts in various states but most of the time it's a matter of what the landlord can get away with in that market.

Generally speaking, the bigger the premises, the more the tenant is likely to be on the hook for...
 
To answer the OP, you will have the commercial rate applied.


Generally speaking, the bigger the premises, the more the tenant is likely to be on the hook for...
You've hit the nail on the head - essentially the more sophisticated the tenant or the larger the facility the more likely that the tenant will be paying their share of the outgoings.

A gross lease is inclusive of most outgoings except usage of water (most commonly) But some expenses don't increase at the same rate as the lease eg. Council rate pegging and other regulated charges. These usually increaze below the rate in the lease returning more to the lessor over time.
 
Massive differences in finance as well so its worth factoring in the additional costs associated with commercial lending when comparing the two.
 
Massive differences in finance as well so its worth factoring in the additional costs associated with commercial lending when comparing the two.
Yes - I don't think most people expect the fees, low LVR and the margin that comes with Commercial lending. I have seen clients thinking like resi to find rates 3% above market, $2.2K a year in rollover fees + LVR around 60% + $45 a month fees. + Val. They do get surprised. One of the benefits of using a SMSF for some sml business owners. They use their superfund to avoid a bank.

Commercial REA take a bit upfront too as its hard work. Long vacancy periods are a risk for commercial. A very different market.
 
Yes - I don't think most people expect the fees, low LVR and the margin that comes with Commercial lending. I have seen clients thinking like resi to find rates 3% above market, $2.2K a year in rollover fees + LVR around 60% + $45 a month fees. + Val. They do get surprised. One of the benefits of using a SMSF for some sml business owners. They use their superfund to avoid a bank.

Commercial REA take a bit upfront too as its hard work. Long vacancy periods are a risk for commercial. A very different market.
And yet I know commercial landlords paying interest rates in the mid 4% range, with no ongoing fees. And others with 70%+ LVRs. This is why generalisations are a bad idea in the CIP forum....

"Different" can mean "Better" for some people!
 
But these are generally borne by the tenant or taken from the bank guarantee
Or a tenancy incentive upfront. It can be hard to pull tenants and is often a LL cost with refit clauses too. Or a negotiation problem when you quit the lease (the LL will only want the fitout if a new tenant also wants it. Some don't care and want it stripped = Westfields). Not all tenancy capex suits the owner....
 
Massive differences in finance as well so its worth factoring in the additional costs associated with commercial lending when comparing the two.
There can be significant differences in finance but it is not necessarily so, I have a commercial loan with Westpac @4.57% and fees that add about 1%, If I increased the loan limit which I would do if I wasn't planning on selling one security, the % of fees should come down, to make the finance cost close to the same as my 5.17% residential rate.
 
Or a tenancy incentive upfront. It can be hard to pull tenants and is often a LL cost with refit clauses too. Or a negotiation problem when you quit the lease (the LL will only want the fitout if a new tenant also wants it. Some don't care and want it stripped = Westfields). Not all tenancy capex suits the owner....
The type of incentives offered ultimately affect the value of the property.

A one off $100,k fit out incentive can be an expense to the lessor however justifies an above market rent whereas a $100k rent free reducees the rental return and erodes value without a benefit going to the owner. Acceptting a reduced rent without a rent holiday will also reduce market value but will maintain cashfloe.

Each circumstance is different.
 
There can be significant differences in finance but it is not necessarily so, I have a commercial loan with Westpac @4.57% and fees that add about 1%, If I increased the loan limit which I would do if I wasn't planning on selling one security, the % of fees should come down, to make the finance cost close to the same as my 5.17% residential rate.
Possibly yes but you are looking at one aspect of commercial lending - interest rate. What if you wanted an LVR higher than 65% or required a 25 year loan term instead of 15 year term.

Also thats a really good rate with Westpac (since they are not known for their competitive pricing in both the resi and commercial space). How much is the loan amount? IS the security cross with any residential security?
 
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