Leasing - Mixed Bag

Dear Dazz - When leasing out as a vacant block I can see the big upside as far as your responsibility goes, but does that also mean that potentially the shed could be bulldozed by the tenant without repercussion?
 
No it does not. The agreement is I am responsible for the section that they pay me for...that is the dirt and elbow room between the four corner posts of the property. They are responsible for everything that they don't pay me for....that is everything above and below the ground.


I offered to take responsibility for the whole shooting match, but the price was going to double. They politely declined and said they were more than happy with just paying the bare block rental price and they'll take care of the rest.


The normal obligations of insuring, maintaining, repairing etc for everything is still in their lap....with make good clauses when they leave Speaking of make good, in the 5 weeks they've been in there, they've already repaired the roof, replaced the ceiling, re-wired the whole place and started recarpeting.


They had 2 separate whinges to me, one by email complaining that the drainage system was overflowing when it rained hard on the driveways and once yesterday when the electrician they had in installing 8 x RCDs with him saying that the Landlord is responsible for this....


With the drainage I clearly pointed out that the sewers were clearly underground, and had nothing to do with the dirt...therefore it was in their lap, and I had an interesting conversation about them taking legal advice from an electrician about my Lease, seeing as though he hadn't read it, and so it seems neither has my Tenant.


I'm heading up their today for a meeting to educate them on what they've agreed to, so I nip this **** in the bud and don't get any more of this for the next 8 years. Crack on !!
 
it seems the perceived risk with commercial more than compensates with the real-life rewards

I used to be scared witless of commercial property.

Everything that I read initially, especially from Noel Whittaker and Jan Somers said exactly that and for many years I believed it all, without question and without any experience myself. The ol' fear factor was firmly planted.

It took years of hesitation (about 4) before finally dipping my toe in the water. What a wasted 4 years.

Walking looks pretty risky also when you're able to safely crawl around. There are painful stumbles when first learning to walk....but once up and running, you'd never go back to draggin' your sorry @$$ around the place on all fours.
 
I used to be scared witless of commercial property.

Everything that I read initially, especially from Noel Whittaker and Jan Somers said exactly that and for many years I believed it all, without question and without any experience myself. The ol' fear factor was firmly planted.

It took years of hesitation (about 4) before finally dipping my toe in the water. What a wasted 4 years.

Walking looks pretty risky also when you're able to safely crawl around. There are painful stumbles when first learning to walk....but once up and running, you'd never go back to draggin' your sorry @$$ around the place on all fours.

Any suggestions for which type of CIP to invest in first? office? shop?
 
Any suggestions for which type of CIP to invest in first? office? shop?

Hi Aaron,

Good question cos it does get a bit daunting.

I'm a big believer in matching your investment property choice to your personality...

If you're a bit rough around the edges, then perhaps industrial might be the go.
If you like dealing with pristine clean and people in Armani suits, then perhaps a CBD office suite might be better.
If you are a shopaholic and know malls back to front, perhaps a retail outlet might suit well.
If you're a tradie, perhaps a rundown vacant warehouse screaming out for a make-over might be best.


We chose industrial to start with (strata in a nice newish complex with a Tenant just recently installed on a fresh 10 year Lease) because we knew nothing and wanted everything done for us so we could learn the ropes slowly.

We quickly learnt the ropes and dove headlong into a couple of rusty sheds on a nice big development block. That has shown far superior capital growth and rental growth over our first purchase....but you need to learn how to walk before you can run.

Throw in a few office suites and a few retail shops into the mix and before you know it, the portfolio starts to balance itself up so you have good coverage across all sectors....

Then you can start getting brave and pick and choose. There is so much variety out there, the choices are endless.
 
Hi Aaron,

Good question cos it does get a bit daunting.

I'm a big believer in matching your investment property choice to your personality...

If you're a bit rough around the edges, then perhaps industrial might be the go.
If you like dealing with pristine clean and people in Armani suits, then perhaps a CBD office suite might be better.
If you are a shopaholic and know malls back to front, perhaps a retail outlet might suit well.
If you're a tradie, perhaps a rundown vacant warehouse screaming out for a make-over might be best.


We chose industrial to start with (strata in a nice newish complex with a Tenant just recently installed on a fresh 10 year Lease) because we knew nothing and wanted everything done for us so we could learn the ropes slowly.

We quickly learnt the ropes and dove headlong into a couple of rusty sheds on a nice big development block. That has shown far superior capital growth and rental growth over our first purchase....but you need to learn how to walk before you can run.

Throw in a few office suites and a few retail shops into the mix and before you know it, the portfolio starts to balance itself up so you have good coverage across all sectors....

Then you can start getting brave and pick and choose. There is so much variety out there, the choices are endless.


Dazz, Thanks, Ithikn that's a very helpful post
 
Great post Dazz, thanks. I just have a few things to ask regarding your post.

If you're a bit rough around the edges, then perhaps industrial might be the go. Is this because the negotiations can be tough and the likelihood that the players would be on the rougher side of things?

If you like dealing with pristine clean and people in Armani suits, then perhaps a CBD office suite might be better. Whilst negotiations would be tough as well, would this be more numbers related and more sophistication and creativity is required, specially with contracts?

If you are a shopaholic and know malls back to front, perhaps a retail outlet might suit well.Shouldn't this be more on the understanding of shopping habits or knowing how to negotiate a better price rather than knowing how to shop? Just thinking out loud.

If you're a tradie, perhaps a rundown vacant warehouse screaming out for a make-over might be best. I don't really have a question for this one :)
 
Hi Telejazzer,


1. Yes, the industrial Tenants are usually a bit rough around the edges to start with....so it helps to speak their language. Obviously once you start getting into the really large places, say 15m a pop each, the industrial Tenants get pretty good and they are similar to the commercial boys with suits etc, but I suspect most people will start out with a small factory or warehouse, which typically will have a tradie or truck driver or something similar. You don't want to roll up with a suit and tie on and/or high heels and make up during negotiations.....they'll initially get their back up and then tear you to shreds mate. I've been surprised at how good that class of people are at negotiations. They are normally very good, cos they do it constantly in the jobs all day every day.


2. Yes, everything will be number related and great pressure is usually brought to bear against the Landlord in terms of offset office space only a few doors away. Usually, these folks are real nit-pickers, and have their corporate legal counsel representing them, and they delight in screwing a newbie Landlord against the wall and locking them into a long - say 10 years deal - at low initial rent levels with capped escalations so it'll stay low for the whole 10 years. Once again, if you don't know what to look for, these folks will eat you alive as well.


3. Yes, knowing how to spend money in a shop as a customer doesn't qualify you for jack-****. Any useless toad can go into a shop and spend money. It takes no brainpower at all. I was being facetious with the shopaholic terminology. Being a shopaholic is death on a stick for wealth creation, and the exact opposite of what you need to be.


4. Sorta makes perfect sense doesn't it.
 
Hi Aaron,

I'm a big believer in matching your investment property choice to your personality...
.

I'll start looking for a hair salon and get back to you.

Thanks for the post also re flower purchases in the retail precinct. Belly laughs have been at a premium this year.

cE
 
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