Going Commercial
- Thread starter geoffw
- Start date
Well done, what are the details?
I am a prolific user of realcommercial.com.au but have yet to find such a thing within 20km of sydney cbd.
That's because you are putting in the wrong parameters.
I have one investment for sale in Penrith for 8.3% net, while all our other investments are in the low to mid 7's. You'd be well to find anything remotely close to 10% net yields that close to Sydney CBD.
PS: Congrats geoffw, I hope the property has brought you closer to achieving your end goal/s.
PS are you speaking to agents as well?
Some vendors are funny and do not want their property advertised so there might be some gems hidden in off-market deals. You will also not have to compete with as many other buyers etc.
Where abouts? When I was lookng I recall everything being in the 6's...
It's too early to celebrate this. We've exchanged but not settled. I've now just heard from the agent that the tenant is going to walk out on the lease.
There were two leases, one was 1+1+1, and we didn't expect that option to be taken up. But we fully expected the other tenant to be around for a long time.
While the tenant is still responsible for the lease, and by law is obliged to pay for the full term, in practice I'm guessing it could be very expensive for me to chase her up. And it's always possible for somebody to declare themselves bankrupt.
There are three signatories to the lease, which might make bankruptcy difficult. But there is no guarantor.
It's possible that the seller knew about this- in fact I'd think it was extremely unlikely that he would not have known anything. It's also possible that he has been foregoing rent in order to sell the shop- speculation of course.
So we have the option of walking out before settlement (costs incurred maybe $35k), or taking a risk on the tenant continuing to pay, or being able to find a replacement tenant. Our expenses would be interest on $200K + outgoings- rates, land tax, insurance.
There were two leases, one was 1+1+1, and we didn't expect that option to be taken up. But we fully expected the other tenant to be around for a long time.
While the tenant is still responsible for the lease, and by law is obliged to pay for the full term, in practice I'm guessing it could be very expensive for me to chase her up. And it's always possible for somebody to declare themselves bankrupt.
There are three signatories to the lease, which might make bankruptcy difficult. But there is no guarantor.
It's possible that the seller knew about this- in fact I'd think it was extremely unlikely that he would not have known anything. It's also possible that he has been foregoing rent in order to sell the shop- speculation of course.
So we have the option of walking out before settlement (costs incurred maybe $35k), or taking a risk on the tenant continuing to pay, or being able to find a replacement tenant. Our expenses would be interest on $200K + outgoings- rates, land tax, insurance.
Jonno, that is my experience as well. But many posters here seem to keep finding 8 plus returns. I am not interested in anything far from Sydney CBD as I believe that capital growth and tenant demand then becomes speculative. In commercial IP, I need to figure out what is the likely longer term demand for my property.
We haven't spoken with the tenant directly. Settlement has been delayed so we don't really have the right.
At least there's three signatories on the lease so that gives us a small amount of protection against a bankruptcy or lease default. One of the signatories is the father I the main tenant.
We just have to wait and see. There's nothing more we can do.
Thank you for sharing your story. I sincerely hope everything works out for you on this.
This comment of yours might serve to highlight one risk control for those looking to buy commercial property.
Check the rent history with the rental agency (and if suspicious ask to see the vendor's bank statement showing deposit of rents).
This forms an independent check:
Not only that rent is paid, but it is paid on time. Untimely payments could be an indication of tenancy business stress.
Totally agree IV, as part of your due diligence, getting the tenant ledger or payment report from the managing agent will highlight any deficiency in their payments or what risk you may be exposed to.
Likewise, something to watch out for is whether action has been taken to lock out the tenant or default etc has happened post contract of sale, as you now have an interest in the property (though no right to the income).
Likewise, something to watch out for is whether action has been taken to lock out the tenant or default etc has happened post contract of sale, as you now have an interest in the property (though no right to the income).
The payment history on this one has been good. I only found out when this happened though that there was a problem on another property. That however was due to Wagga floods.
This is a takeaway shop- the tenant runs three more. I took this as a sign of strength- but it seems she's spread herself thin.
I suspect the shop could be a better run takeaway, but then I'm only used to sandwich making ;-)
This is a takeaway shop- the tenant runs three more. I took this as a sign of strength- but it seems she's spread herself thin.
I suspect the shop could be a better run takeaway, but then I'm only used to sandwich making ;-)
I was recently advised that the agent was unable to send me the rental ledger due to privacy reasons - this was for resi tho. Is it really a privacy issue, when a future landlord is unable to see the history? I was however explained re the arrears/outstanding rent over the phone.