After months of looking at residential PI my husband and I purchased an industrial block of land as we felt given his background in building design we knew more about this area and we could use his skills to design and lodge applications to coucil. The catch - instead of a $400K outlay we have spent $200K and are looking at another $5 - 600K to build. We can only build if we get a pre-construction tenant.
We have an interested national tenant, but they are after 10 +10 year lease - 12 weeks rent free (sounds like a lot) and suggesting a lease rate that would bring us a 10% return. The agent is pushing us for a counter offer and to be honest I feel like we are plucking figures from thin air. This forum has been very informative, but I feel we need further advice - who do you trust?
Concerns: 12 weeks rent free sounds excessive - it is a new estate, access hasn't been finished, but a major national tenant (much bigger than our fish) has purchased 2 blocks down. I thought rent free deals were only for desperate developers trying to get the first cab off the rank?
When doing a pre-construction lease do you demand a deposit or charge a bond - elsewhere on the forum people have suggested 3 - 12 months rent up front. Is there a formula for working this out? Doesn't a deposit or bond contradict a rent free period?
10% return - what does this mean? We have been told it is the cost of the project divided by the expected rent? Is this true - if so is this considered reasonable for an industrial IP.
Rent reviews? How do you determine a schedule for increasing rent - is it just CPI? When do you factor in a market review ? Is 10 years + 10 good or too limiting given the stage the development is at?
We have purchased the land as a partnership - abn + gst registered, but the bank will most likely want a fair amount of the equity in our home - implications of this?? mixing business and personal assests? Is this possible.
Sorry, lots and lots of questions - I am well out of my depth and treading water, keen for our first dip into the IP pool not to be out last. I hope someone out there can help answer some of these questions.
Cheers,
KSTA
We have an interested national tenant, but they are after 10 +10 year lease - 12 weeks rent free (sounds like a lot) and suggesting a lease rate that would bring us a 10% return. The agent is pushing us for a counter offer and to be honest I feel like we are plucking figures from thin air. This forum has been very informative, but I feel we need further advice - who do you trust?
Concerns: 12 weeks rent free sounds excessive - it is a new estate, access hasn't been finished, but a major national tenant (much bigger than our fish) has purchased 2 blocks down. I thought rent free deals were only for desperate developers trying to get the first cab off the rank?
When doing a pre-construction lease do you demand a deposit or charge a bond - elsewhere on the forum people have suggested 3 - 12 months rent up front. Is there a formula for working this out? Doesn't a deposit or bond contradict a rent free period?
10% return - what does this mean? We have been told it is the cost of the project divided by the expected rent? Is this true - if so is this considered reasonable for an industrial IP.
Rent reviews? How do you determine a schedule for increasing rent - is it just CPI? When do you factor in a market review ? Is 10 years + 10 good or too limiting given the stage the development is at?
We have purchased the land as a partnership - abn + gst registered, but the bank will most likely want a fair amount of the equity in our home - implications of this?? mixing business and personal assests? Is this possible.
Sorry, lots and lots of questions - I am well out of my depth and treading water, keen for our first dip into the IP pool not to be out last. I hope someone out there can help answer some of these questions.
Cheers,
KSTA