Just offered $265k below asking

[Deltaberry]

No these are personal deals. My job has nothing to do with real estate.

My debt's not small.

 

[Melbournian]

joker...

Who are you trying to impress?

do you think people would believe all your stories???

Find a different playground....

trust me it's true. that's a difference between rooks and the seasoned investors

 

[onetwothreefour]

I just did two CIP loans in the past 2 months. One which was $1m. Another was $2m. The $2m one was actually lower, but it comes with annual reviews etc. The $1m one was set and forget.

A few months before that, I did a mixed use of around $1.5m. It was actually in the 4s, but that was a fixed rate. And I threatened to walk if they didn't give me 4s. I suspect they're all very similar between $200k and $2m anyway, just maybe tougher lending criteria.

Comm ir is higher than resi ir. currently resi ir is around 5%.

 

[omni]

Comm ir is higher than resi ir. currently resi ir is around 5%.

Edit: I read up a couple of post and found my answer...

 

[handyandy]

HA, I've found these owner to tenant deals to be very hard work. It's hard enough negotiating the terms of a sale contract, let alone the terms of a lease at the same time. And are they selling because of financial difficulties within the business etc? Are they pumping up the proposed rent / term to artificially increase the sale value? Are you essentially buying a component of debt in the tenant's business?

To go down this track IMO you need to know your values inside out, have a Lease you're fully comfortable with and attach it to your offer so everything is negotiated at once while the deal is still in play. I've tried to do deals where we would negotiate a lease later and it's a month or two before you find out the whole thing was never going to happen... deals where the vendor has put their proposed lease on the table shut down discussions pretty quickly - they were just waiting for someone to agree to their terms and could afford to wait.

I hope you have better luck!

Thanks for sharing your experience.

This is also my view on this deal. I opened discussion with the statement 'where's the lease'. Just over two weeks and still haven't sighted one.

If the lease isn't right then it will kill off the deal.

Reason for selling is that 2 partners own the property and I am told one partner wants his money out to buy other real estate. Seems like a strong business as they have also leased a yard across the road. Although this would indicate that they should really move to a bigger site.

The RE mentioned that they were trying to negotiate a longer lease on the other yard so this may also end up being a deal breaker or at least extend the negotiations.

Their to do list -
certify internal office,
prepare suitable lease on the prospective purchase
line up lease extension on 2nd yard to coincide with a 3 year lease on this property

Cheers

 

[starter]

I would go even further if the vendor and the business are not the same entity (eg. property in personal name and business in a company's name) and get the lease executed at exchange so that it automatically transfers to you at settlement.

For my CIP we negotiated the lease and had it attached to the sale contract. However, at settlement they wanted to go back and renegotiate certain terms of the lease again.

Edit: this seems to be the case here handyandy with one partner owning the property. I'd get the lease signed up at exchange or an acknowledgement from the business that it will enter into the lease at settlment.

 

[handyandy]

An update

The original CIP that I started this thread with went to auction and I was the highest bidder - t my original offer price. Property was passed in and the owners are now trying to find a new tenant. Eventually the market will rise enough that they can sell at their price.

This was the property

http://www.realcommercial.com.au/pr...house-nsw-milperra-500938391?listingType=rent

In parallel the other CIP has finally reached tacit agreement on the lease.

Basically I went back and reduced my offer to account for the various problems with the property and I have a net net lease on the table. ( i think that's what you call them) The tenant will pay for rates, repairs, building insurance not just public liability etc. The only down side is that I only get 4 months bank guarantee.

I have to contemplate whether I will accept the 4 months or insist on my 6 month and walk away if not obtained.

This whole deal has really taken a back seat with any enthusiasm well and truly extinguished.


Cheers

 

[handyandy]

Well I have decided to proceed with this deal and am now waiting for a confirmation letter from the RE encapsulating all that was discussed throughout the negotiations.

We will see if that reflects what I want.

It's a slow game.

Cheers

 

[MTR]

Please let us know when you crack the champers, this has been a long, drawn out process, but looks like you getting pretty close to what you asked for

 

[Piston Broke]

I've got a small CIP nearby.

 

[Dazz]

Well I have decided to proceed with this deal and am now waiting for a confirmation letter from the RE encapsulating all that was discussed throughout the negotiations.

We will see if that reflects what I want.

It's a slow game.

G'day handyandy,


Saw some comments in another thread and then went searching for this one.


Sorry I haven't commented before.


I posted a few years ago about these deals where the Vendor morphs into a Tenant and the Buyer morphs into a Landlord. You've got two (but not parallel) games going on.


The big game is the sale of the property, where the Vendor holds all of the aces. You as the Buyer hold bugger all.


The smaller game is the Lease itself, where you as the Landlord hold all of the aces and the Tenant holds none.


Any switched on Vendor worth their salt, or switched on enough to be advised correctly, would never start to play the smaller game until they had completely stitched up the bigger game. Once they morph into the Tenant, they've lost all power.


In every single deal that I've been involved with over the last decade that encapsulated this scenario, the Vendor has either ;

• Asked way too much for the property as a purchase price
• Gifted themselves a low rent
• Gifted themselves a long tenure
• Gifted themselves low escalation clauses
• Gifted themselves extremely generous terms where they aren't responsible for much at all

In the end handyandy, in all cases, it was all too difficult. Their superior position in the sales negotiation as Vendor trumped anything I could do as a Buyer, and it ultimately rendered the long term position as the new Landlord in a hopeless position.


I gave up on these scenarios about 4 years ago, and now when I learn the Seller wishes to be the Tenant, I simply move onto the next opportunity. Wasting time negotiating which always ended in a fruitless agent stating "this is what the Vendor wants and they will not negotiate on the Lease terms".


If you have completed the transaction, I'd be interested to know.


If in the future handyandy, you purchase industrial property where you have more say in the Lease terms, I'd be more than happy to share with you my failsafe Lease that is effectively a ground lease only, regardless of what infrastructure is on the land. We have about half our holdings on this now and it is a pure pleasure to be the Landlord for.


Good luck with your portfolio and hope your sons are turning out to be good managers like their father. All the best.

 

[Dazz]

Ah now I get it! Thanks!
Dave was asking if white hot was hotter then red hot - yes?
Yes white hot is the hottest

Couldn't help being a pedant.

Red hot is the coldest....but white hot is not the hottest.

Blue hot is hotter than white hot.


Lifted from some geeky website, see below.

The black body radiation spectrum first becomes visible at a coldest being red hot.

hen...
Orange Hot
Yellow Hot
White Hot
Blue Hot



Here is what the continuous spectrum is:
http://upload.wikimedia.org/wikipedia/co...


If you have a body that is at the temperature noted, and it is spectrally uniform in emissivity, then you should expect it to be the color indicated.

--------------------------

What is prior to red? Well, entirely infrared. Much like the radiation emitted by you and I, and every other object safe to touch.



What happened to green? Good question.


Well, you see, because if it peaks in green, it will contain a falloff in both red and blue. The superposition of all colours yields white to the human eye.


What happened to violet? Another good question.


By the time it gets hot enough for blue to no longer dominate, it is primarily UV and thus not visible.​

 

[pinkboy]

Couldn't help being a pedant.

Red hot is the coldest....but white hot is not the hottest.

Blue hot is hotter than white hot.


Lifted from some geeky website, see below.

The black body radiation spectrum first becomes visible at a coldest being red hot.

hen...
Orange Hot
Yellow Hot
White Hot
Blue Hot



Here is what the continuous spectrum is:
http://upload.wikimedia.org/wikipedia/co...


If you have a body that is at the temperature noted, and it is spectrally uniform in emissivity, then you should expect it to be the color indicated.

--------------------------

What is prior to red? Well, entirely infrared. Much like the radiation emitted by you and I, and every other object safe to touch.



What happened to green? Good question.


Well, you see, because if it peaks in green, it will contain a falloff in both red and blue. The superposition of all colours yields white to the human eye.


What happened to violet? Another good question.


By the time it gets hot enough for blue to no longer dominate, it is primarily UV and thus not visible.​

Any chance of some visual examples Dazz, say using female tennis players as examples?


pinkboy

 

[starter]

G'day handyandy,


Saw some comments in another thread and then went searching for this one.


Sorry I haven't commented before.


I posted a few years ago about these deals where the Vendor morphs into a Tenant and the Buyer morphs into a Landlord. You've got two (but not parallel) games going on.


The big game is the sale of the property, where the Vendor holds all of the aces. You as the Buyer hold bugger all.


The smaller game is the Lease itself, where you as the Landlord hold all of the aces and the Tenant holds none.


Any switched on Vendor worth their salt, or switched on enough to be advised correctly, would never start to play the smaller game until they had completely stitched up the bigger game. Once they morph into the Tenant, they've lost all power.


In every single deal that I've been involved with over the last decade that encapsulated this scenario, the Vendor has either ;

• Asked way too much for the property as a purchase price
• Gifted themselves a low rent
• Gifted themselves a long tenure
• Gifted themselves low escalation clauses
• Gifted themselves extremely generous terms where they aren't responsible for much at all

In the end handyandy, in all cases, it was all too difficult. Their superior position in the sales negotiation as Vendor trumped anything I could do as a Buyer, and it ultimately rendered the long term position as the new Landlord in a hopeless position.


I gave up on these scenarios about 4 years ago, and now when I learn the Seller wishes to be the Tenant, I simply move onto the next opportunity. Wasting time negotiating which always ended in a fruitless agent stating "this is what the Vendor wants and they will not negotiate on the Lease terms".


If you have completed the transaction, I'd be interested to know.


If in the future handyandy, you purchase industrial property where you have more say in the Lease terms, I'd be more than happy to share with you my failsafe Lease that is effectively a ground lease only, regardless of what infrastructure is on the land. We have about half our holdings on this now and it is a pure pleasure to be the Landlord for.


Good luck with your portfolio and hope your sons are turning out to be good managers like their father. All the best.

My purchase was like that Daz. Definitely can relate to what you're talking about re 2 different games now, got very frustrating at time.

 

[Scott No Mates]

The black body radiation spectrum first becomes visible at a coldest being red hot.

hen...
Orange Hot
Yellow Hot
White Hot
Blue Hot



Here is what the continuous spectrum is:
http://upload.wikimedia.org/wikipedia/co...
​

You forgot the next one that Pinkboy spotted: sheethot

 

[geoffw]

You forgot the next one that Pinkboy spotted: sheethot

I don't care what colour she is. If she's hot, she's hot.

 

[handyandy]

G'day handyandy,


Saw some comments in another thread and then went searching for this one.


Sorry I haven't commented before.


I posted a few years ago about these deals where the Vendor morphs into a Tenant and the Buyer morphs into a Landlord. You've got two (but not parallel) games going on.


The big game is the sale of the property, where the Vendor holds all of the aces. You as the Buyer hold bugger all.


The smaller game is the Lease itself, where you as the Landlord hold all of the aces and the Tenant holds none.


Any switched on Vendor worth their salt, or switched on enough to be advised correctly, would never start to play the smaller game until they had completely stitched up the bigger game. Once they morph into the Tenant, they've lost all power.


In every single deal that I've been involved with over the last decade that encapsulated this scenario, the Vendor has either ;

• Asked way too much for the property as a purchase price
• Gifted themselves a low rent
• Gifted themselves a long tenure
• Gifted themselves low escalation clauses
• Gifted themselves extremely generous terms where they aren't responsible for much at all

In the end handyandy, in all cases, it was all too difficult. Their superior position in the sales negotiation as Vendor trumped anything I could do as a Buyer, and it ultimately rendered the long term position as the new Landlord in a hopeless position.


I gave up on these scenarios about 4 years ago, and now when I learn the Seller wishes to be the Tenant, I simply move onto the next opportunity. Wasting time negotiating which always ended in a fruitless agent stating "this is what the Vendor wants and they will not negotiate on the Lease terms".


If you have completed the transaction, I'd be interested to know.


If in the future handyandy, you purchase industrial property where you have more say in the Lease terms, I'd be more than happy to share with you my failsafe Lease that is effectively a ground lease only, regardless of what infrastructure is on the land. We have about half our holdings on this now and it is a pure pleasure to be the Landlord for.


Good luck with your portfolio and hope your sons are turning out to be good managers like their father. All the best.

Well, you are right. After 7 months of stuffing around I have walked away.

The final straw was that when I went to sign the contract again (3rd time) there were further issues that hadn't been discussed but were suddenly features of the lease.

The last one was that they would not be responsible for any of the concreted driveways or yard.

I had already made way to many concessions and which in retrospect I regretted.

Many lessons learnt and on to the next one.

Thanks for everyone's contributions.

Cheers

 

[Dazz]

Well, you are right. After 7 months of stuffing around I have walked away.

It normally ends the same way.....unless as the Buyer you're a complete numpty and are prepared to get shafted left right and centre.

There is a huge price to pay if you wish to remove the risk of having to find a secure Tenant.

Chasing these "Vendor morphs into a Tenant" deals is a wood duck game.

There are good deals out there.....keep searching.

 

[Intrinsic_Value]

It normally ends the same way.....unless as the Buyer you're a complete numpty and are prepared to get shafted left right and centre.

There is a huge price to pay if you wish to remove the risk of having to find a secure Tenant.

Chasing these "Vendor morphs into a Tenant" deals is a wood duck game.

There are good deals out there.....keep searching.

The sharemarket equivalent is buying into an IPO that that is being offloaded by private equity.

After a nice 70% drop in price I am running my ruler over McAleese (MCS), and only one of their divisions was an private equity sell off.

 

[Player]

Well, you are right. After 7 months of stuffing around I have walked away.

The final straw was that when I went to sign the contract again (3rd time) there were further issues that hadn't been discussed but were suddenly features of the lease.

The last one was that they would not be responsible for any of the concreted driveways or yard.

I had already made way to many concessions and which in retrospect I regretted.

Many lessons learnt and on to the next one.

Thanks for everyone's contributions.

Cheers

Next...........

I have also spent way too much time on these "lease-back" type scenarios, only to bear no fruit.

My experience (at least in S/E Qld), is the seller (prospective tenant) usually offer a higher than market rent for their first term and then add on a string of option periods without ratchets. Obviously this caps up the sale price of the asset, whilst at market review for option uptake (assuming they stay) the rent will drop and by extrapolation so will the value of the property.

Currently looking at one with a decent tenant however a gross lease with terms highly in their favour and one month bond, just like a resi investment. It may as well not exist.

The building is good and it is in a great precinct, very tight vacancies. They are only one year in to a 5 x 3 x 3. Yearly rent increases to CPI (barely nothing), however you can bet that water rates, council rates, land tax and insurance will increase by more than 2.5 % annually for the next four years.

I cannot understand why the owner succumbed to such a lease. That precinct was still kicking goals last year. The property would actually be worth more empty. Everything has a price though......so I am still working on it.

Onward and upward Andy.

Thanks for sharing your story. We all learn from these discussions.