Had a good day

[Dazz]

Well, the wife and I have just had a really good day.

We were in our overalls on one of our industrial sites, clearing up people's garbage yet again (as you do). Had the chain saw in my hand and sweat dripping down my nose when a shiny white car drove up and disgorged a rather large man wanting to look around the place.

We swapped business cards (always keep some in my bib and brace overalls just in case), and I had a smirk as his eyebrows went up when he read my card.....the card didn't fit the image I presented in front of him.

Anyway, we chatted for a while and showed him through the place, being careful to avoid the garbage still strewn about by the former dreggs of tenants.

He was the managing director of a large skip bin company and needed premises pronto. They were way up in the hills and wanted a more prominent presence closer to the city, so the size of the property and the location were ideal for him.

We cut a deal there and then on the spot and I'm spending the rest of the night, glass of red in hand putting the Lease together for execution before I leave the country this weekend.

Here's the numbers ;

Capex

Purchase price of the property......780K
Stamps and other costs................40K
Total Loan.................................820K
Interest Rate.............................7.17%
Land value................................700K (88%)

Income

Interest Payable...........$ 1,130 p.w.
Outgoings.....................$ 250 p.w.
Rent for minor section of the property....$ 379 p.w.
Deal struck today for the majority of the property.....$ 1442 p.w. plus O/G's

The chap has agreed to a 5 year lease with a 2 yr option. He intends on spending about 50K doing up the property, improving driveways and lifting the roof on the 3.5m sheds to accomodate his 5.5m tippers, putting in a garden and putting in carpet and painting where he thinks he needs it. I said "Go for your life, as long as there is no soil contamination, I'm happy."


We have been trying to rent the majority portion of these premises since May last year. The previous owners offered to stay (truck operators with disgusting filthy habits) for 3 years with a 3 year option after that on only $ 507 p.w. with no outgoings paid. I believe we made the right decision in telling them no thanks and having it empty for the past 8 months waiting for the right tenant. The money lost over the past 8 months will be made up in about 5 months, and then for the next 6-1/2 years we'll be well in front.

Heading up to his current operation to see what they are really like and start doing some financial background checks.

The in cost I'll be charging is the standard 1 month in advance, 1 month security bond and 2 months bank guarantee, a total of $ 25K before he drives the first truck onto the property.

Anyway, we have had a very good day. Now to finishing off that 50 page lease, wrapping him tighter than a drum with phrases like "The Lessee shall, at the Lessee's sole expense and risk.....to the Lessor's satisfaction."

Hope you all had a successful day as well.

Cheers.

 

[Glebe]

Great stuff mate, you're very switched on... wish I had your wits.

 

[DaleGG]

Woohoo!
That is wonderful news and congrats.
Thanks for sharing the good news

Dale

 

[willair]

Well Done,Dazzling you must have some advantage over everyone else in WA,
just one question do you yourself write all the terms,conditions,and obligations
yourself, why was the property not in a clean state once the last company
left must be some reason to have the place untidy,one would think that
the clean up was first in line,do not take this this the wrong way i only own
resindential run down properties, i just want to learn more about comm
property and the problems that one has to be know about..
good luck
willair..

 

[itinerantotter]

How excellent, Dazzling!!

Cheers

 

[JIT]

Great work. Your posts are always fascinating to read.

 

[Dazz]

Well Done,Dazzling you must have some advantage over everyone else in WA,
just one question do you yourself write all the terms,conditions,and obligations
yourself, why was the property not in a clean state once the last company
left must be some reason to have the place untidy,one would think that
the clean up was first in line,do not take this this the wrong way i only own
resindential run down properties, i just want to learn more about comm
property and the problems that one has to be know about..
good luck
willair..

Thanks willair,

Well there's a few questions peppered in there. I'll see if I can tackle a few of them.

1. There's plenty of people I bump into during casual conversations on site with contractors etc, except most are older folks or funds, who by their very nature possibly don't frequent forums such as this, who are doing the same thing as our group.

2. Yes, for the last five industrial leases covering the last three titles we've purchased, I've done all of the T&C's, along with haggling and arguing with the Lessee's solicitors. The lessons learnt have served us well, and no doubt will continue to in the future. They can be arduous at times, even threatening to pull out of the deals, which is OK....as long as the tenant really wants to operate out of the place, they bring their solicitors back into line and usually instruct them to back off....if not, they lose, the solicitors lose and I merrily go about looking for another tenant. In this climate over here in WA, I'm finding companies falling overthemselves to sign up large premises on attractive rates for long terms.

3. It wasn't clean initially, because the ratbag illiterate tenants I evicted refuse to clean up their mess. It usually takes a few days of hauling / cutting / sweeping and bin work to rid the place of years of built up garbage....no problem for us....we are used to it. We do like showing prospective tenants through after we've cleaned up, but if they are keen, they easily look past the mess....as long as they can see you are making a concerted effort to get rid of the worst of it.

4. Unlike RIP's, the tenants usually change everything around anyway, installing their own carpets and paints etc, especially all of their signage out the front. This guy however, was a welcome relief, prepared to install new 4,000 sqm of hardstand, lift up the truss height by 2m, repair water runoff problems and install new soakwells, take over the $ 6,000 lease on the electronic security fence surrounding the property and install another new 500 sqm shed, all at his expense. The Lease clearly states that all improvements made by the Lessee during the due and punctual performance of the Lease, ownership of said infrastructure shall revert to the Lessor at the expiry of the term and any relevant option taken up. He'll be there for the long haul, I am sure due to the very close proximity to the majority of his clients, so he'll probably get 10 or 15 years usage out of the facilities he installs.

I'm just happy to collect the growth on the 7,000 sqm of dirt and some of the free cash spinning off from the lease. It'll put about $ 700 p.w. clear into our pocket, which offsets some of our residential stuff which, as usual, drags it's feet.

 

[willair]

Dazzling,
Thanks for explaining all the facts,you seem to have good plan in place.
So i guess all i have to find now is something that fits those
guidelines in my area.
good luck
willair..