Fees commercial vs residential

Discussion in 'Commercial Property' started by Giswal, 16th Apr, 2015.

  1. Giswal

    Giswal Giswal

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    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
     
  2. Ironlady

    Ironlady Member

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    I would say yes. Our industrial 1050m sq land rates is about 4k pa
    Check with local council/website

    Ironlady
     
  3. balwoges

    balwoges Member

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    Commercial rates apply to rates, water & power, however these costs are usually reimbursed by tenant/s
     
  4. Giswal

    Giswal Giswal

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    Commercial, fees, water, power, rates, council

    Thanks for the quick reply. Is there anything that I can not expect to have reimbursed?
     
  5. balwoges

    balwoges Member

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    Any Capital expenditure
     
  6. HiEquity

    HiEquity Member

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    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...
     
  7. Scott No Mates

    Scott No Mates ...and people wonder why?

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    To answer the OP, you will have the commercial rate applied.


    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.
     
  8. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    Massive differences in finance as well so its worth factoring in the additional costs associated with commercial lending when comparing the two.
     
  9. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    Many commercial leases have makegood and refit clauses which are capital expenditure.
     
  10. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    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.
     
  11. Scott No Mates

    Scott No Mates ...and people wonder why?

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    But these are generally borne by the tenant or taken from the bank guarantee
     
  12. HiEquity

    HiEquity Member

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    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!
     
  13. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    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....
     
  14. lazibones

    lazibones Member

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    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.
     
  15. Scott No Mates

    Scott No Mates ...and people wonder why?

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    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.
     
  16. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    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?