15 years....interest only for first 5.
Going Commercial
- Thread starter geoffw
- Start date
15 years....interest only for first 5.
When you talk about bank reviews, does this always mean a rise in interest rate for the loan?
So something like this - a little shopping centre?
http://www.realcommercial.com.au/property-retail-nsw-erina-500746423
No. An annual review entails:
1. Providing your tax returns / ATO running statements etc to the lenders each financial year. Depending on what's in there they may adjust the rate / LVR.
2. Requiring a revaluation of the property every 2-3 years at your cost. With a property of about $5m this would cost about $5,000-$10,000. You don't even get a copy of the report!
I had annual reviews for the business loan. Although the criteria would be quite different for a building loan, one of the most painful things was that completed tax returns had to be submitted by the end of September- for this bank (BankWest). This was very awkward- the accountnant has their busiest period, and can give much better attention a little later.
These are fixed rates only. But then the interest rate is a moving beast so you wonder whether to lock it in. The variable is still in the 6s. Aaron just did one for me.
I did help my folks lock in a bigger loan at the same time with a commercial bank and they did low 5s variable, but that had an annual review. And the private banker at that bank was pretty incompetent so I'm telling them to refi away from them or just pay it off with cash first and worry about refi-ing later.
I did help my folks lock in a bigger loan at the same time with a commercial bank and they did low 5s variable, but that had an annual review. And the private banker at that bank was pretty incompetent so I'm telling them to refi away from them or just pay it off with cash first and worry about refi-ing later.
Yep, that's a corker. Not sure if it would be sub-$5m without more on the income/lease expiry profile etc.
If you're looking at CBD commercial, you shouldn't focus so much on initial yield. As I said earlier, it's like the recent building I bought with my folks.
If I wanted to get 7-8% yield, I can spend some money (say about 5-10% of building value) and modify the building, open up folding window panes, kerb side cafe features, erect a rooftop bar etc. That's value add. I can then get an increased capital value straight away and someone will rent it for say 7-8% yield.
Alternatively, I can lease it out to someone at say 6% net yield. Let them spend the hundreds of thousands of dollars to to fit the place out. At 4% CPI rates, it'll be at 7-8% net yield in 4 years time. And the tenants are secure because they've locked leases of 20 years (in fact they ALL want 20 year lease). Even if they struggle and leave in a year (even better), it's a prime spot and they've spent hundreds of thousands fitting it out and I can get the 7-8% net yield right away without spending the renovation costs under option 1.
So is all this doable? I've hardly settled the property for 2 weeks and I have 3 offers of the second alternative from prominent groups, and a few who want me to fit it out under option 1 then rent from me for say 7-8% yield.
If I wanted to get 7-8% yield, I can spend some money (say about 5-10% of building value) and modify the building, open up folding window panes, kerb side cafe features, erect a rooftop bar etc. That's value add. I can then get an increased capital value straight away and someone will rent it for say 7-8% yield.
Alternatively, I can lease it out to someone at say 6% net yield. Let them spend the hundreds of thousands of dollars to to fit the place out. At 4% CPI rates, it'll be at 7-8% net yield in 4 years time. And the tenants are secure because they've locked leases of 20 years (in fact they ALL want 20 year lease). Even if they struggle and leave in a year (even better), it's a prime spot and they've spent hundreds of thousands fitting it out and I can get the 7-8% net yield right away without spending the renovation costs under option 1.
So is all this doable? I've hardly settled the property for 2 weeks and I have 3 offers of the second alternative from prominent groups, and a few who want me to fit it out under option 1 then rent from me for say 7-8% yield.
Rang the agent. It is a 11mil plus situation with net rental yield of 850k per annum. So that rules me out.
Back on topic.
We settle tomorrow.
The tenant is going to continue in the shop for the time being. She has a strategy she's putting into place to try to minimise stock wastage.
The property is in Wagga Wagga.
If this Trade Centre ever goes through will in effect your CIP?
http://www.dailyadvertiser.com.au/story/1402221/wuai-group-wagga-bound-to-cement-trade-deal/