Going Commercial

china said:
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.
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Generally the quality of the building/tenant and net return of a commercial property are inversely related. 8% plus returns are easy to get on a building in the middle of nowhere which is ready to fall down, but 8% plus returns would be scarce on a quality building with secure tenure. Not impossible, but you'd have to couple a useless agent with a careless vendor and you'd have to get in very quick.

I disagree that only the Sydney CBD will have growth but if that is the market you know best, then that is where you will make the most money.

Hope it all works out for you, geoff. I hope the rental is in line with market rental and you are able to fill the space in a timely manner.
 
monalisa said:
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.
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Not sure if it against privacy regulations. When we do reference checks, other agent's and landlords are happy to send us tenancy ledgers.

Resi may or may not be different; however, if they aren't allowed to give it out, I'd want a reference in writing not just over the phone.
 
JonnoM said:
Resi may or may not be different; however, if they aren't allowed to give it out, I'd want a reference in writing not just over the phone.
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Good point!! thanks.

In our latest purchase we were advised that tenants were 'great' - but had 2 weeks rent outstanding from Feb/March - so I decided to get vacant possession, would have been worse if they had told me otherwise! Incompetent PM!
 
monalisa said:
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.
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The agent should be able to provide you a copy of the owner's ledger (but this would show what commission was being paid, like you'd be interested). It would also show all of the other expenses which are paid by the agent on behalf of the owner.
 
I have dabbled in CBD and within 500m of CBD a fair bit. With the right renovation works, subdivision, good business ideas etc, 8% net yield (ie net cash inflow over net costs including stamp duty and renovations etc) is achievable. I'm now in the process of trying to set up the next interesting subdivision in the CBD with multiple businesses on a building that originally only had one business. If successful, again 8% is achievable.

I never look at yield as headline rent divided by purchase price. That's just being self-delusional.

Of course, quality properties with good growth is what matters at the end. The 8% net yield is just a bonus in these areas, since on a good day the next guy will buy it off me for 4.0% gross yield (or 3.2% net yield) anyway.
 
JonnoM said:
Generally the quality of the building/tenant and net return of a commercial property are inversely related. 8% plus returns are easy to get on a building in the middle of nowhere which is ready to fall down, but 8% plus returns would be scarce on a quality building with secure tenure. Not impossible, but you'd have to couple a useless agent with a careless vendor and you'd have to get in very quick.

I disagree that only the Sydney CBD will have growth but if that is the market you know best, then that is where you will make the most money.
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My experience exactly during my searches of realcommercial.com.au and ringing various agents.

Close to Sydney CBD, these are areas with long established history of capital growth. I don't know much about outer areas but suspect that these are areas of more speculative growth.
 
It has indeed. With the AUD hitting 90cents and below, the value of my cash has dropped at least 10 percent. But I need to find a good buy otherwise, it could be a lot worse overall.
 
china said:
It has indeed. With the AUD hitting 90cents and below, the value of my cash has dropped at least 10 percent. But I need to find a good buy otherwise, it could be a lot worse overall.
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How long have you been looking? Perhaps consider getting some help from those who have achieved this before.
 
china said:
It has indeed. With the AUD hitting 90cents and below, the value of my cash has dropped at least 10 percent. But I need to find a good buy otherwise, it could be a lot worse overall.
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Are you looking to buy overseas then? Because that's when the value of your cash has dropped 10%. The last time I looked houses haven't gone up 10% in the same time that the dollar has dropped.
 
geoffw said:
Are you looking to buy overseas then? Because that's when the value of your cash has dropped 10%. The last time I looked houses haven't gone up 10% in the same time that the dollar has dropped.
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No but in terms of buying ability for imported items such as tv, car, clothes, overseas travel - my /our cash purchasing power has gone down.
 
Mr China
Have you considered buying a house to start with ion the northshore or northern beaches in Syd

Yields are crap.. but there must be some cap growth potential
 
china said:
I wonder what is the time frame between someone joining somersoft and acquiring a commercial IP.
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Given that this is primarily a residential forum, quite possibly it's mostly never.

Personally I suspect you're better off with a resi IP at least to start off with. The yield is not as good, but can still be positive, with probably better prospects for growth given the right property.
 
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