First CIP - Some interesting observations

This is one of those "anecdotal" posts.

As some would know we just bought first CIP in Dec, which settled in Jan.

Last two months have had the CIP and a Resi IP both being in the same cycle for all the bills!!!

Outcome:

$0 banked post bills for two months on the resi. Seriously, fully tenanted, but every bill which could arrive, arrived during those two months (rates, insurance, body corp, land tax, and water). Have just put the rent up a decent bit zero effect. Two months of banking $0.

The CIP I hear you ask..... Well, the bills just kept on coming in, similarly. However, not only are the yields higher - but nice Mr. Tenant pays ALL outgoings. Net outcome - I get all my rent, and tenant pays every last cent. And somehow all those bills get paid too.

Had a bit of a nice kick reading the CIP statement this arvo. Interesting difference.

Wonder what I'll buy next???????!!!!!!?????? :)
 
Interesting difference.


Good for you Trogdor. You're up and running, and sounds like your confidence is building. You're learning lessons that can never be taught from a seminar, forum or a book.


Now remember, this is a residential property forum, so please restrict your comments to your houses. No-one is interested in what you are doing with the CIPs. Welcome to the club !! :)
 
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Now remember, this is a residential property forum, so please restrict your comments to your houses. No-one is interested in what you are doing with the CIPs. Welcome to the club !! :)

Bunkum!!

Dazz knows that people ARE interested in what he does, but often he ruffles feathers with his "delivery". It has nothing to do with the "content".

My first thought on reading it was to know more about what you bought, where, what type of tenants etc.

I find it interesting to know about all sorts of deals. I don't want or plan to get into CIP, (nor ever to buy a unit, nor another share) but I enjoy reading about what others are doing.

Care to share?
 
Good post troddy.

my thoughts are the same as bene313. Just don't have a few 100k in the bank to get started. the Resi you could say are the building blocks.

Regards.

RH
 
Like Wylie, I am interested in learning about all kinds of deals. I just don't like it when I am belittled for being a Resi Investor. There certainly is room for both.
 
Now remember, this is a residential property forum, so please restrict your comments to your houses. No-one is interested in what you are doing with the CIPs. Welcome to the club !! :)

Sounds like an opportunity for a maiden CIP forum bobby.
 
Like Wylie, I am interested in learning about all kinds of deals. I just don't like it when I am belittled for being a Resi Investor. There certainly is room for both.
Skater, big egos are always part of any group dynamic, especially public forums.

Don't worry, tenants are tenants; some pay rent for buildings to live and sleep in, others to work and play in. Either way, both have their merits, and as long as they all pay their dues to their landlords/ladies, who gives a tos$ what name the walls surrounding them are known as. :)
 
Good for you Trogdor. You're up and running, and sounds like your confidence is building. You're learning lessons that can never be taught from a seminar, forum or a book.


Now remember, this is a residential property forum, so please restrict your comments to your houses. No-one is interested in what you are doing with the CIPs. Welcome to the club !! :)

Thank you Dazz... Completely agree.

I think the next big milestone will be the option exercise date (late 2011). I'm 99.9% sure it will be fine, but it will be just like getting the first (and then each subsequent) CIP rent cheque - a confidence building experience!!!

Then with another 3 years of rental stream locked in the plan will be to start shopping for CIP #2, hopefully 50% bigger and better than #1. :D
 
Indeed Trogdor.

I would describe the option renewal (usually hand in hand with a market review) as like the art of plucking a goose.

The aim is to extract the maximum amount of feathers whilst incurring the minimum amount of hissing.

I seem to recall your asset is retail. I don't own any of those myself, so have not read the Retail Act, but make sure you have your copy of that to hand and read it from cover to cover, marking in all of the little notes in your favour and against you. You'll no doubt need to refer to it over and over again throughout your ownership tenure.

Good luck with it all.
 
Don't worry, tenants are tenants; some pay rent for buildings to live and sleep in, others to work and play in. Either way, both have their merits, and as long as they all pay their dues to their landlords/ladies, who gives a tos$ what name the walls surrounding them are known as. :)

No - they are not!!!!

The economics are fundamentally different. That was my original point !!!

Resi is a great stepping stone but a fundamentally unscalable investment proposition.

You either cop awful net yields or end up having to manage a portfolio of many many many lower valued IP's, which is a chore in and of itself.

Two or three more CIPs for me and the accumulation phase is over, and the management is a breeze. None of this 10+ portfolio of resi stuff, with 10+ kicthens, bathrooms, sets of outgoings for me to fund, and whinging tenants.
 
Indeed Trogdor.

I would describe the option renewal (usually hand in hand with a market review) as like the art of plucking a goose.

The aim is to extract the maximum amount of feathers whilst incurring the minimum amount of hissing.

I seem to recall your asset is retail. I don't own any of those myself, so have not read the Retail Act, but make sure you have your copy of that to hand and read it from cover to cover, marking in all of the little notes in your favour and against you. You'll no doubt need to refer to it over and over again throughout your ownership tenure.

Good luck with it all.

Exactly, am also very much looking forward to the market review at that time!! Love the analogy btw...!!!

It is retail. I had a read of the Act before I took the plunge, but will certainly make sure to read it in great detail....

Good thing I'm an ex-lawyer, hey!!!
 
You either cop awful net yields or end up having to manage a portfolio of many many many lower valued IP's, which is a chore in and of itself.

There is a middle ground though. A handful of $700K IPs with great tenants and negligible maintenance.

Two or three more CIPs for me and the accumulation phase is over, and the management is a breeze. None of this 10+ portfolio of resi stuff, with 10+ kicthens, bathrooms, sets of outgoings for me to fund, and whinging tenants.

I am not interested in CIPs, mainly because, like shares, I don't know enough about them to dip my toe. Also, there are so many CIPs around that seem to sit empty for months or years, that I wouldn't want to risk that.

But I do enjoy reading about those that do dip their toes.

I suppose plenty of people think I am "brave" for self-managing whereas, for me, it is a cakewalk.

So, how about sharing some details, how you decided which CIP to buy, is it local, was there a tenant in situ, did you inherit the lease which you will be using to negotiate an increase etc.
 
No ratchets or land tax liability

Exactly, am also very much looking forward to the market review at that time!! Love the analogy btw...!!!

It is retail. I had a read of the Act before I took the plunge, but will certainly make sure to read it in great detail....

Good thing I'm an ex-lawyer, hey!!!

Hi ya Trogdor,

As you may or may not be aware..........No ratchet clauses with retail and also inability to pass on land tax to the tenant. :mad:

I wouldn't think that you should have any trouble with rent reduction at that 2011 option time, however picture a scenario where your tenant was due for option around late 2008 or into early 2009 when business and consumer sentiment was not so bouyant :(

Not trivialising your asset by the way, as I also own one of these, just be aware of the shortcomings when compared to assets that may glean triple net leases such as office/professional space and warehouses/sheds.

All the best with your future plans and acquisitions :)
 
Hi ya Trogdor,

As you may or may not be aware..........No ratchet clauses with retail and also inability to pass on land tax to the tenant. :mad:

Hi Player, I am aware... Not ideal, but three points:

1. Its still a whole sight better than Resi !! You cant pass on anything with resi as we all know, and you dont get ratchets either!!

2. Retail I see as a good "beginners" CIP. There is a lot of goodwill associated with a lease (arguably over office space / warehouses, etc.) and especially coming up to final term you have a big stick over the tenants. Imagine the effect on their business / asset if you chose to evict or make life difficult at end of entire lease...!!

3. I dont have enough equity to buy a triple net, Dazz type property, and retail has more scope for "entry level" investments. Im in my (very) late 20's, so plenty of time to learn and buy bigger and better.

I wouldn't think that you should have any trouble with rent reduction at that 2011 option time, however picture a scenario where your tenant was due for option around late 2008 or into early 2009 when business and consumer sentiment was not so bouyant :(

Good point. Part of the decision to buy this was my view on inflation and the economy in 2010 onwards. Also, its in a upmarket strip in a "holiday" town with lots of retirees, which is a short drive from Melb (and a new freeway to be build over the next few years so its < 1 hr drive from the SE suburbs of Melb). Lots of the businesses in small retail here are run by "wives" of guys who's jobs can prop up the businesses in tougher times. Also, the phenomenon in 2009 was that a lot of people who'd holiday o/s would go to this town and similar towns when things were tougher, but would still spend (having saved airtickets, etc..). So Im optimistic about the demographic.

Not trivialising your asset by the way, as I also own one of these, just be aware of the shortcomings when compared to assets that may glean triple net leases such as office/professional space and warehouses/sheds.

All the best with your future plans and acquisitions :)


Sure - I agree.... Maybe one more retail then something bigger and better!! We dont have to get it perfect, just better than the last and keep on learning and making $$.
 
I am not interested in CIPs, mainly because, like shares, I don't know enough about them to dip my toe. Also, there are so many CIPs around that seem to sit empty for months or years, that I wouldn't want to risk that.

Sure. You gotta have the SNF or whatever its called :)

I suppose plenty of people think I am "brave" for self-managing whereas, for me, it is a cakewalk.

True.. Agreed!!

So, how about sharing some details, how you decided which CIP to buy, is it local, was there a tenant in situ, did you inherit the lease which you will be using to negotiate an increase etc.

I put up a post about this after I had signed the contract of sale:

http://www.somersoft.com/forums/showthread.php?t=58607

Happy to answer any other qns.

Btw - what net $$ rental returns would you get from $700K (resi) IPs with great tenants and negligible maintenance, which you refer? Assume this is in Bris metro? Keen to hear more.
 
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