Is this a good deal looking for value adding?

[bianca]

Ok--last post for the night, I promise!

I have the opportunity to buy the following out of town property - being out of town scares me a little/ no control but never the less....

commercial / 5 tenancies leases in place for about 3 years/ 2 ready to expire
asking price around $700000.00
combined rent nett $60000.00 -All outgoings have been accounted for.rents have not been updated for a while
premises need some upgrade, but it is not neccessary straight away. However the possibility to upgrade and achieve an extra $13000.00-$16000.00 is not unreasonable , at a very low cost to us( I have done the homework)Location is great,and there are no problems associated with the deal in any way.

If I can get $100to $200 a week positive cashflow from this, before refurbishment, on a straight out IO loan, is this a good buy? I used the somersoft software and the positive cashflow from the "capetalized" window shows an income of between $1200 to $1400 per week (but I still dont understand this fully) An opinion would be great because this wont sit for too long. thank you guys soooo much, I appreciate your help.

 

[bianca]

anyone care to comment?
Not having ventured into commercial is a little scary..

 

[Barracuda]

You might find an issue is the commercial loan vs a residential loan. From my quick research they tend to require higher deposits >=25% and have higher interest rates. Other than that, I have no experience with commercial properties so can add much else.

Cheers, Barracuda

 

[agent 86]

Bianca,

Going by his posts on this forum, Dazzling,http://www.somersoft.com/forums/member.php?u=5276 is the king of commercial.
Perhaps message him.

 

[handyandy]

Bianca

Those 2 tenancies about to expire would be the risk in the deal. How much rent do they constitute out of the total mentioned?

Possibly the vendor is selling off due to the fall of in rental returns as he is aware that the current tenants aren't renweing and normally commercial can take some time to fill.

As far as "rents not updated for a while". These properties are on commercial leases that normally have escalation clauses in them you really need to consider other like properties in the area and determine what the market rents are.

Just some thoughts

Cheers

 

[commercial]

I have a huge interest in comercial investing and developing,responding to your question, I think that the site you are looking at is a too risky for tourself because you sound like you are an investor not a developer.
Try to find yourself a property that has a "First Term of about 8 to 15 years, always remember options mean nothing to the landlordand the tenant can walk after the "First term".
Your property has a very short Term and is extremely risky, (eg, once your tenants leave in 2 years you could have problems finding others and then sometimes you have to reduce your asking price on the rent to try to find someone. Alot of the time properties like that the tenants are what we call " mum and Dad Tenants which are risky. My advice try to find a property which has a "Blue Chip Tenant, ( eg, Subway Nandos, Bakers Delight, Mobil, BP, Shell, Caltex, Woolworths, etc,etc,etc. As i said we do this every day and have a great knowledge in this field.

Regards, Commercial

 

[TomL]

Welcome aboard commercial, sounds like you have some great experience to share that could benefit us alot.

T.