Going Commercial

We've finally done it. We've bought a commercial property.

It's a small one, in rural city. Two shops, the larger one on a long lease, the smaller one much shorter.

When both shops are let, it will be returning 13% (after all acquisition costs)- if the short term unit doesn't get relet it will be down to 9%.

Cost was $200K.

Thanks to Nathan for sourcing this deal- we're happy.

We were after cash flow due to my employment situation (ie I have none), and were restricted in the funds we had access to. This fitted in well with our needs and resources.
 
Hi Geoff

Congratulations! I would also be interested in whether these yields are net or gross and whether you accessed any finance for this and if so on approx what terms?

Good luck with it....
 
The figures are gross- but the tenant is responsible for all outgoings- rates, landtax, building and external maintenance- except building insurance and PM fees. One lease is 18 months into a 7+5+5, the other six months into 1+1+1.

So 13% less 8% of that for PM fees, and around $2k pa insurance. That would leave about 10.5% net.
 
Hi Geoff

Congratulations! I would also be interested in whether these yields are net or gross and whether you accessed any finance for this and if so on approx what terms?

Good luck with it....
Financed from the sale of the Subway stores- funds have been sitting in offset for some months.
 
Well done Geoff. I'm wondering how long it took Nathan to find and why he didn't snap it up himself. If he had his matches with him he might have got it for much less :D:p:D.
 
It all depends on Geoff's own personal circumstances but lo-doc commercial stuff is pretty pricey for what it is. In any case, best of luck with the purchase!
 
Congrats Geoff. Would you be willing to post further details around exactly where the properties are, how exactly it was sourced and your rationale for picking the particular area and property?
 
The property was sourced by Nathan Birch. Originally he had posted details of another deal on Facebook, to which I responded. That one didn't quite fall into place. There were a couple of other deals he put to me- one was beyond my means, one was in a smaller place- if I was going rural I wanted a big place with a good economy and good prospects. So there was not a rationale for choosing the area, only for agreeing.

There's been some people here who have said that Facebook is a waste of time. I see it as just another communication tool, which an be used by anybody for any sort of communication. In this case it out me in touch with Nathan, and that's turned out to be a mutually beneficial relationship (he does charge a buyer's agent fee).
 
Congrats again Geoff.
The PM fee seems a bit high to me, so you could perhaps negotiate down a bit there. I'm paying 5.5 on my NSW regional CIP and I think that's fairly standard.
 
Well done Geoff. Something I'd like to get into, but lack the courage and lack of knowledge re: commercial is holding me back at the moment. Also well done Nathan.

Mystery
 
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