My First Comm Property Purchase

Great post indeed.

Sanzy, if you're still kicking about mind giving us an update? Good to see someone else from Western Syd, we should set up a get together one of these days.
 
Hi all,

To update you all on how it is going.

It has now been about 4 months since I took over this property. I have a property manager looking after the property for me.

As part of taking over the property a series of rent increases were going to take place which would increase the NET return by about 2 - 4 %. These increases should be starting to take effect at start of March with different tenants (10 tenats in total) rental increases starting when the lease review period happens.

In the mean time one of the mid sized tentants has decided not to renew the lease (just ended a 2 year lease but did have a 2 year option) So a new tenat has to be found and hopefully slotted in asap. I am being told the property manager is currently talking to a potential tenant about taking this shed.

All in all this last 4 months has been pritty stress free. Although I am seriously reconsidering if the current property manager is right for me, there have been a couple of communication issues. I am just waiting to see how the process of getting a new tenant goes before I decide if they will work out long term.

I can say that having gone thru this process once now, I would be much more confident of doing it again. Maybe even on a much larger scale. Just need to get some more capital so I can start the search all over again.

Sanzy.
 
Nice to hear it's coming along smoothly Sanzy....

Let us know how you go with your agent finding a new tenant and if you allow them to maintain management rights.....

And thanks again for sharing...
 
It has now been about 4 months since I took over this property. I have a property manager looking after the property for me.

Hi Sanzy,

Appreciate the update. Can you enlighten us on the going rate for your property management for your sheds?

Much difference to Resi management fees?

Any extra or less fees when finding a new tenant?

Thanks again

Rooster
 
Congratulations!!

Good luck with the purchase and thank you for sharing.

As a recent first time CIP buyer myself, really appreciate more discussion on here re: CIPs.

Excellent post.

For your next CIP purchase (I'm sure there is one in your future) what would you do differently?

And...do you think that your solicitors should have worded the contract so that you didn't get hit with penalty interest when it was the vendor who was late getting paperwork?

Great job - all the best with it.
 
do you think that your solicitors should have worded the contract so that you didn't get hit with penalty interest when it was the vendor who was late getting paperwork?

Ambitious - but it'll never fly.

The Seller's solicitor writes the Contract. The Purchases solicitor simply latches on, twiddles their thumbs and comes along for a lucrative ride.

Vendor late or defaults - no penalty.
Buyer late or defaults - Seller rips in.

It's the way it has always been and the way it will always be.

Haven't had the pleasure of being a Vendor as yet. I relish the opportunity of changing hats and being a complete and utter bar steward to some hapless schmuck of a Buyer....
 
Haven't had the pleasure of being a Vendor as yet. I relish the opportunity of changing hats and being a complete and utter bar steward to some hapless schmuck of a Buyer....


You're halfway there Dazz.... The only person on a lower rung than the buyer...is the next tenant who've you've just written the lease for...:D

I'm quickly learning that there are some things you can change and whole heap of thing you can't so why worry about it.... So I just go with the ebbs and flows and take comfort in the fact that the end result will be worth it..
cheers

B.D
 
Excellent post.

For your next CIP purchase (I'm sure there is one in your future) what would you do differently?
Great job - all the best with it.


Thanks Obama - sorry just saw your post.

We have bought again (i've posted somewhere on the forum about it). Bargain much harder, and don't be scared to walk away half way through was the real emphasis on the second.

And we got better value too second time around, so thats good.

Though to be fair, we were buying the place next door, so had a good feel by then of value!
 
A great story, Sanzy, and I for one am inspired by that you went from only 2 RIPs into a CIP. Congratulations, of course! Obviously you did the hard yards in research and learning before you acted and it paid off big time, and that's the main lesson I take from your post and many of the responses. That, and the courage to take such a big leap. Well done!
 
Just thought I might drop in here and provide a bit of an update on how this is all going.

In a word, good. I would love to say great but not quite. I notice last time i posted in Feb I had had one tenant decide not to renew their lease and was looking forward to rental increases.

Well so much has changed since then.

I have had 5 of the 11 tenant vacate since then (for a number of reasons) Including one of the biggest tenants in the lot. Of these i have replaced 3 so far, I am expecting the paper work for a fourth some time this week and hopefully the last will be filled by end of June. If this happens it will be the first time in 4 months that I am at 100% tenancy with no one on notice to vacate. At its worst I had three shed's empty at the same time. Due to the high turn over the rental increases have not gone ahead as I would rather keep the current set of tenants in place than the 3% increase. Next year will be different as I now have no periodical tenants all of them are on leases with options and defined rental increases.

My largest tenat (basically an anchor tenat as they have signage out the front of the peroperty) are working with the property manager to take up the first of three options on their lease and seem to be happy to stay where they are which is good.

I have spent time working with my property manager so that he understands what type of information I need and how often I need it. This has paid off well as I am now comfortable to send him an email and with in a couple of days I will get a comprehensive email of the information I need. Sorting this issue out was actually more stressful than replacing tenants, I see it as a business relationship with my property manager and as in any business relationship you need to sort out how you talk to each other. I am glad I stuck with the current company as it is working well now.

I did get a call a few weeks ago about the "common area" driveway having some pot holes and one tenat had called the property managers to insist the landlord get it fixed. Seems the old landlord would fix it as he was using one of the shed's for his own business. The tenant got a bit of a rude shock when he was asked why he let it get so bad when his lease states he is responsible (as well as the other tenants) for upkeep of the driveway. The property manager when speaking to me about it suggested that due to the high turn over and that there are a couple of renewals soon that I fix up the pot holes this time but now that each tenant has been reminded of their responsibility under the leases they need to keep the driveway at the level it gets brought back to. My property manager said he was more than happy to go head to head with the tenant about it if i wanted to force the issue but I made the choice to offer a bit of a carrot and hold the stick back for next time.

I guess that just about sums up what is heppening with me. The journy to CIP from RIP has been interesting. I am now in the stages of starting to prepare for the first loan review (5 year loan 5 reviews from the bank, but they can only force a revaluation of the property every two years at my cost of course). I have been told as long as the rent is 1.5 times the repayment amount i should be fine for the first review.

I am happy i took the move from rip to cip, it has not effected my sleep at night factor as the income has never been below the loan repayment amount. Yes I will not get the amount of income i hoped due to turn over of tenats but I think for a first cip and for the first year i should clear about 10% ROI so I am not going to be disapointed. Then next year I am hoping that a tenant that has been in talks with my property manager may finally (after 7 months of talks) make an offer to have me build them a shed on the block. That could help increase the rental income 20 - 30 % (or more) of the over all block as it will be the single biggest SQM rental on the block.

Now just comes the first EOFY and tax time where I need to deal with a trust/business tax and my personal tax. My account loves me and my billable hours.
 
It's great to see that the numbers are still pretty positive one year into the excercise Sanzy..

Might I ask, given what you've seen/experienced with your first multi-tenant comm, would you go down the same path again?
EG, Will your next one be a group of factories again or will you look for a large single tenant for you next project?

cheers

B.D
 
Bird Dog,

I would go multi tenant again in a second. Truthfully once my property manager and I were on the same page I have not had any major issue.

I do like the fact that even when I had 1/3 rd of my tenants with notice to vatcate or empty that I still had the income to cover the loan repayments.

I may not go hunting for a multi tenant but I would definatly look at one for my next. Infact saw a nice little shopping centre with 6 - 7 hops in it, if only I could find the capital to pull the deal together.

One comment I will make on multi tenants which caught me a bit is Insurance instead of just giving them the details of one person, what they do, do they store dangerous items e.g. chemicals, are they upto date on fire maintenace and do they have security I had to collect that information on 11 seperate companies. The property managers earnt their management fee that month I can tell you. Oh and they will again earn it at renewal when all that information has to be collected again to passed to insurance to update their records which is in about 3 months time.

Oh and a good insurance broker is also invaluable at that point in time.
 
Bird Dog,

I would go multi tenant again in a second. Truthfully once my property manager and I were on the same page I have not had any major issue.

I do like the fact that even when I had 1/3 rd of my tenants with notice to vatcate or empty that I still had the income to cover the loan repayments.

I may not go hunting for a multi tenant but I would definatly look at one for my next. Infact saw a nice little shopping centre with 6 - 7 hops in it, if only I could find the capital to pull the deal together.

One comment I will make on multi tenants which caught me a bit is Insurance instead of just giving them the details of one person, what they do, do they store dangerous items e.g. chemicals, are they upto date on fire maintenace and do they have security I had to collect that information on 11 seperate companies. The property managers earnt their management fee that month I can tell you. Oh and they will again earn it at renewal when all that information has to be collected again to passed to insurance to update their records which is in about 3 months time.

Oh and a good insurance broker is also invaluable at that point in time.


I must admit I do like the idea of sacrificing a little rent (by having 11 tenants, one space is probably vacant at any given point) for the trade off for having it's "serviceable" all of the time.
I'll definitelyl consider either an existing multi tenant property or a possible conversion on the next one, once the dust has settled next year.

B.D
 
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