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From: Mike .
another newbie's plea for help
From: Phil M.
Date: 28 Feb 2001
Time: 15:58:30
WARNING: Long post follows...
My Wife and I've been looking at buying our first IP - as it happens a floor in an office block (strata titled). Most of our reading so far has been on res. prop. Part of the motivation for going commercial was to find more permanent rental accomodation for a small company that I am a director of. i.e. as the company grows, we can boot other tenants out when their leases expire and end up using the whole floor. Well that's the plan.
The property is advertised for $200K, but badly needs ~$40K spent on it for fitout to attract decent tenants. Other floors in the building which are nicely fitted out are full. Based on these floors I guess fitted out "my" floor would be worth $210-230K. So I've offered $170K (which the agent refused to write up).
Based on good reports from people here and elsewhere I've approached the NAB for finance (I've been a lifelong CBA customer 'til now, but they haven't been too enthusiastic).
I was pleasantly surprised when they said they are prepared to loan the whole $223K ($170 IP, $10K purchasing costs, $43K fit-out) secured against the IP. I mean I asked them to but I didn't expect them to say yes! IO Loan on IP @ 7.10% fixed for 3 years. They want to assume our current home mortgage ($40K on a $180K house), which they want paid out in 5 years on variable rates (currently 7.56%). They also require that if the IP is cash flow positive after 3 years that the principal is paid down. According to my calcs. 80% occupied is the break-even point at today's prices.
Other bits and pieces: Ongoing fees: $952pa Establishment fees: $1200 Transfer of securities: ~$2000
Well I've pretty comprehensively spilled my guts about this. It seems to good to be true which is why I thought I'd let some of the gurus here take the deal apart and tell me what I've missed.
Thanks for reading this far! Phil M.
another newbie's plea for help
From: Phil M.
Date: 28 Feb 2001
Time: 15:58:30
WARNING: Long post follows...
My Wife and I've been looking at buying our first IP - as it happens a floor in an office block (strata titled). Most of our reading so far has been on res. prop. Part of the motivation for going commercial was to find more permanent rental accomodation for a small company that I am a director of. i.e. as the company grows, we can boot other tenants out when their leases expire and end up using the whole floor. Well that's the plan.
The property is advertised for $200K, but badly needs ~$40K spent on it for fitout to attract decent tenants. Other floors in the building which are nicely fitted out are full. Based on these floors I guess fitted out "my" floor would be worth $210-230K. So I've offered $170K (which the agent refused to write up).
Based on good reports from people here and elsewhere I've approached the NAB for finance (I've been a lifelong CBA customer 'til now, but they haven't been too enthusiastic).
I was pleasantly surprised when they said they are prepared to loan the whole $223K ($170 IP, $10K purchasing costs, $43K fit-out) secured against the IP. I mean I asked them to but I didn't expect them to say yes! IO Loan on IP @ 7.10% fixed for 3 years. They want to assume our current home mortgage ($40K on a $180K house), which they want paid out in 5 years on variable rates (currently 7.56%). They also require that if the IP is cash flow positive after 3 years that the principal is paid down. According to my calcs. 80% occupied is the break-even point at today's prices.
Other bits and pieces: Ongoing fees: $952pa Establishment fees: $1200 Transfer of securities: ~$2000
Well I've pretty comprehensively spilled my guts about this. It seems to good to be true which is why I thought I'd let some of the gurus here take the deal apart and tell me what I've missed.
Thanks for reading this far! Phil M.
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