My first CIP
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Thanks for the kind words. With the slightly higher interest rate than expected it'll be more like 14k net per year initially but still decent.
Just wondering how is everything going with your first CIP deal? Thought I bump up a bit since your story is inspiring to the rest of the forum members.
Thanks for the kind words Dazz, definitely learnt a lot from the practical experience of going through it myself but I also got a lot out of the stories posted on here from yourself and others.
bonazawealth, sorry for not updating, have been busy with another purchase and the end part of this deal was a little bit stressfull so just wanted to leave it for a while. In short, settlement occured and everything is good now with cash rolling in, but there were various issues leading up to settlement.
I think I mentioned previously about the vendors having a horrible solicitor and he reared his head again. On the morning that settlement was scheduled we were informed that the lease that the parties have agreed to was not acceptable (lease annexed to sale contract and vendor was obliged to deliver it at settlement). Apparently the business (which vendor owns 50% of) hadn't been aware of the lease until now and didn't agree to it, all a big mess and very sneaky of them as the solicitor was then representing the vendor as well as the business.
Don't want to bore too much with the detail, but after various toing and froing, and some aggressive correspondence from both sides, we compromised. From the initial lease we gave up having them pay for landlord insurance (a bit annoying but we can live with it and we do have 4 months rent as security) and included additional clarification that they don't need to fix the existing termite damage (which we wouldn't have asked for anyway). We probably could have played hardball and stuck to our guns and been OK as we were definitely in the right. However, I didn't want to drag it out especially as we didn't want any more bad blood with the business since they'll be our tenant for the next few years.
Definitely learnt a lot from this. Besides the obvious of getting the lease executed rather than as a condition (may not have made much of a difference anyway since the vendor's solicitor probably would have tried something else on), I learnt a lot about negotiating. Especially with looking at the big picture and not getting too involved emotionally. I think part of the reason why they were acting this way was that we negotiated really hard at the start and really put them offside, definitely something to keep in mind. All in all, it ended well, looking forward now to wearing the CIP landlord hat and we still have a tight lease in place so that should be fun.
As Dazz said, onwards and upwards.
bonazawealth, sorry for not updating, have been busy with another purchase and the end part of this deal was a little bit stressfull so just wanted to leave it for a while. In short, settlement occured and everything is good now with cash rolling in, but there were various issues leading up to settlement.
I think I mentioned previously about the vendors having a horrible solicitor and he reared his head again. On the morning that settlement was scheduled we were informed that the lease that the parties have agreed to was not acceptable (lease annexed to sale contract and vendor was obliged to deliver it at settlement). Apparently the business (which vendor owns 50% of) hadn't been aware of the lease until now and didn't agree to it, all a big mess and very sneaky of them as the solicitor was then representing the vendor as well as the business.
Don't want to bore too much with the detail, but after various toing and froing, and some aggressive correspondence from both sides, we compromised. From the initial lease we gave up having them pay for landlord insurance (a bit annoying but we can live with it and we do have 4 months rent as security) and included additional clarification that they don't need to fix the existing termite damage (which we wouldn't have asked for anyway). We probably could have played hardball and stuck to our guns and been OK as we were definitely in the right. However, I didn't want to drag it out especially as we didn't want any more bad blood with the business since they'll be our tenant for the next few years.
Definitely learnt a lot from this. Besides the obvious of getting the lease executed rather than as a condition (may not have made much of a difference anyway since the vendor's solicitor probably would have tried something else on), I learnt a lot about negotiating. Especially with looking at the big picture and not getting too involved emotionally. I think part of the reason why they were acting this way was that we negotiated really hard at the start and really put them offside, definitely something to keep in mind. All in all, it ended well, looking forward now to wearing the CIP landlord hat and we still have a tight lease in place so that should be fun.
As Dazz said, onwards and upwards.
Congratulations Starter and thank you for sharing,
I don't own a CIP but I have been thinking about it for the last 3 years. I own a number of RIPs.
May I ask what caused you to make the transition from RIP to CIP? Is your end goal to live off your income from CIPs and if so how do you plan to achieve it in the shortest amount of time?
I don't own a CIP but I have been thinking about it for the last 3 years. I own a number of RIPs.
May I ask what caused you to make the transition from RIP to CIP? Is your end goal to live off your income from CIPs and if so how do you plan to achieve it in the shortest amount of time?
This is an item that is the owners risk, not the tenant's - why would they agree to it? Likewise the cost of an owner getting a valuation for determining the replacement value of the building for insurance purposes - the tenant doesn't care how the owner determines this amount, they are only obliged to pay the premium.
There are plenty of clauses in leases which simply shouldn't be there and most solicitors have no idea about commerciality.
Mainly cashflow and coming across a CIP where the numbers stacked up in a location which in my view has a lot of potential. My end goal is to definitely live of rent rather than equity, and I do see CIP as a better vehicle for that.
However, for me it's not an either or choice. I'm currently still in the accumulation stage so will also be using RIP to build my equity so that I can get in on the bigger CIP deals. This CIP has balanced my cashflow against a couple of lower-yielding RIP that I hold in Melbourne and will allow me to add more RIP to the port-folio going forward.
The way I see it is that it's a commercial arrangement and any clause can be in there if the parties agree. This isn't a retail lease, so we're not constrained as much regarding what we can or cannot have in the lease. I wasn't surprised that they had an issue with paying landlord insurance, it was more the timing of raising the issue after already agreeing contractually to the form of the lease.
Bump. Everything has been going well, rent coming in every month, some times a couple of months ahead as the tenant just felt like it.
First issue this morning. Got an email from the agent saying that vandals have damaged a couple of windows and how did I want to do the repairs. I promptly informed her that as a CIP I had no responsibility at all for repairs under the terms of the lease and that I'll be expecting her to make sure that the tenant has repaired it correctly.
Now I'm starting to doubt very much the competency of this particular agent. Issue is that they're the biggest in town with the best reputation for CIP, so not sure if the others will be any better.
First issue this morning. Got an email from the agent saying that vandals have damaged a couple of windows and how did I want to do the repairs. I promptly informed her that as a CIP I had no responsibility at all for repairs under the terms of the lease and that I'll be expecting her to make sure that the tenant has repaired it correctly.
Now I'm starting to doubt very much the competency of this particular agent. Issue is that they're the biggest in town with the best reputation for CIP, so not sure if the others will be any better.
Yes insurance would, not sure if the damage is worth the excess though. In any case, that's something for them to work out and organise, not the landlord's responsibility.
Depending upon the requirements under the lease, the tenant is usually responsible for insuring the glass. Has the agent asked for/received a copy of the certificate of currency from the tenant?
I hope you mean that you had your solicitor advise you and drafted the amendments to a Law Society lease/agency lease rather just drafted one yourself.
Even more reason to seek professional advice
Of course, had it reviewed and signed off on. However, and I've seen daz say this himself, I found it much better and more assuring doing the initial draft myself. As a landlord, you need to understand your lease too.
Not really rocket science anyway, compare with the transactions I normally work on for clients it was a nice refreshing change doing a commercial lease.
We expect no less from a top law firm I must say.
