Dazz, are you going to focus on this in the future rather than industrial property?
On the hunt again
- Thread starter Dazz
- Start date
Dazz, are you going to focus on this in the future rather than industrial property?
G'day Telejazzer,
Yes mate - the property was by far and away the best deal I could finance at the time. The fundamentals of the property haven't changed, so if I had a time machine I wouldn't have purchased elsewhere.
You've got to understand that their are differing levels of DD when sorting the wheat from the chaff. Your initial layer sifts through all of the really big ticket items (land value, location, Tenants, yields etc). That usually knocks out the dross and then you get to dig further for the ones that make it that far.
The really deep levels of DD were not done before purchase.....but then if you get it wrong, the penalty is only minor. That's the sort of stuff that I am being bitten with now. More of an irritant mozzie than a great white taking a chunk out.
In terms of changing approaches, I would have obviously hustled up the attornment letter process a lot more thoroughly such that the 3rd biggest Lease was "on foot". Never mind - I know all about what constitutes "on foot" nowadays.
Hi JIT,
No. In the near term I'm going to finish this project and then go for a lap of the paddock on my pushy. The handbrake wants me to take a break from buying property. Non-alignment of goals and all that....
Yes mate - the property was by far and away the best deal I could finance at the time. The fundamentals of the property haven't changed, so if I had a time machine I wouldn't have purchased elsewhere.
You've got to understand that their are differing levels of DD when sorting the wheat from the chaff. Your initial layer sifts through all of the really big ticket items (land value, location, Tenants, yields etc). That usually knocks out the dross and then you get to dig further for the ones that make it that far.
The really deep levels of DD were not done before purchase.....but then if you get it wrong, the penalty is only minor. That's the sort of stuff that I am being bitten with now. More of an irritant mozzie than a great white taking a chunk out.
In terms of changing approaches, I would have obviously hustled up the attornment letter process a lot more thoroughly such that the 3rd biggest Lease was "on foot". Never mind - I know all about what constitutes "on foot" nowadays.
Hi JIT,
No. In the near term I'm going to finish this project and then go for a lap of the paddock on my pushy. The handbrake wants me to take a break from buying property. Non-alignment of goals and all that....
Dazz I thought I might point out a potential problem by holding those deposits yourself as I thought that you had to lodge it with the Director General.
Linky
Dealing with this day in day out and being under pressure from people wanting their money yesterday is part and parcel. As you mentioned people that owe you money (mainly business owners/tenants) take their time to pay and they are more then happy to keep trading on "borrowed" time.
That is why you need to set deadlines and stick to them i.e. if tenant A gets a notice to quit and doesn't pay change the locks simple.
Dazz remember that if you if you ever want to get an inside opinion of the tenants rights ring the office of NSW Fair Trading and get their thoughts you can do this without giving them your name or other details (normally they ask your postcode just for their stats).
The above is free advise and I have used their services a lot as I like to ensure that if I am telling the tenant I am going to change locks some VSBC officer is not going to tell them that I can't.
I personally think that strata titling the shops could be a big mistake and cause you more pain then what is worth.
Linky
Dealing with this day in day out and being under pressure from people wanting their money yesterday is part and parcel. As you mentioned people that owe you money (mainly business owners/tenants) take their time to pay and they are more then happy to keep trading on "borrowed" time.
That is why you need to set deadlines and stick to them i.e. if tenant A gets a notice to quit and doesn't pay change the locks simple.
Dazz remember that if you if you ever want to get an inside opinion of the tenants rights ring the office of NSW Fair Trading and get their thoughts you can do this without giving them your name or other details (normally they ask your postcode just for their stats).
The above is free advise and I have used their services a lot as I like to ensure that if I am telling the tenant I am going to change locks some VSBC officer is not going to tell them that I can't.
I personally think that strata titling the shops could be a big mistake and cause you more pain then what is worth.
Looks like it in NSW, but fortunately in WA we are not subject to such sucky laws.
Could you expand on your reasons why you think it would be a bad idea. We haven't completed a thorough analysis of the costs / benefits of strata titling as yet, so I would be interested in how you arrived at that possible conclusion.
Could you expand on your reasons why you think it would be a bad idea. We haven't completed a thorough analysis of the costs / benefits of strata titling as yet, so I would be interested in how you arrived at that possible conclusion.
Well in my opinion you would need to setup a owners corporate to deal with the common area issues this would lead to quite higher occupancy costs in the eyes of both tenants and purchasers.
not to mention you would be losing most of the powers you have being the sole owner, whilst you may retain ownership of the larger retailers you may be voted out when they discuss issues such as tenancy mix, maintenance contracts, centre management etc etc,
I am not saying that there is no money in it but I am managing tenancies for a building on behalf of 20 owners and it is a nightmare for them they all want out but they don't agree on where to go, what to do, how much they want to pay. Due to this tenants will not move in and unit holders can't sell due to some stupid legal action about the damn roof.
but more then happy for you to prove me wrong.
Also I thought I read somewhere that the site was located in NSW don't recall where I got that from.
I was under the impression that WA retail was closer to commercial then all other states seems I was mislead reading some of this s..t.
not to mention you would be losing most of the powers you have being the sole owner, whilst you may retain ownership of the larger retailers you may be voted out when they discuss issues such as tenancy mix, maintenance contracts, centre management etc etc,
I am not saying that there is no money in it but I am managing tenancies for a building on behalf of 20 owners and it is a nightmare for them they all want out but they don't agree on where to go, what to do, how much they want to pay. Due to this tenants will not move in and unit holders can't sell due to some stupid legal action about the damn roof.
but more then happy for you to prove me wrong.
Also I thought I read somewhere that the site was located in NSW don't recall where I got that from.
I was under the impression that WA retail was closer to commercial then all other states seems I was mislead reading some of this s..t.
Great post as always Dazz-I suppose a bit had to do with the terms of the contract- the lower the price the less negotiable the sellers are on terms- otherwise you could have tried a rental guarantee for vacant non paying tenancy (per sqm).
I'm not fully following the letter of attornment issue- I take it the tenants refuse to pay anything to you until receipt of the same. Normally the buyer's solicitors would advise the tenants upon settlement and rental adjustments made to the purchase price. $ wrongly received by seller after settlement can be recovered as a liquidated debt.
For debts involved where tenants do a runner- sell them to a factoring /commercial agency or a "no win no fee" debt recovery house. It may be worth doing to send a message to remaining tenants.
Get new lawyers to rake over the transaction for a second opinion- may be worth the few thousand for a 2nd opinion.
If you strata title make sure you retain a power of attorney on voting for the maximum time (1yr in Qld from memory) after sale of the lots so you retain control during the sell down.
Interesting point as regards the bank guarantee- Last one I claimed on with ANZ was incident free but am doing another for a client at the moment which may not be smooth sailing.
Needs further investigation.....
I'm not fully following the letter of attornment issue- I take it the tenants refuse to pay anything to you until receipt of the same. Normally the buyer's solicitors would advise the tenants upon settlement and rental adjustments made to the purchase price. $ wrongly received by seller after settlement can be recovered as a liquidated debt.
For debts involved where tenants do a runner- sell them to a factoring /commercial agency or a "no win no fee" debt recovery house. It may be worth doing to send a message to remaining tenants.
Get new lawyers to rake over the transaction for a second opinion- may be worth the few thousand for a 2nd opinion.
If you strata title make sure you retain a power of attorney on voting for the maximum time (1yr in Qld from memory) after sale of the lots so you retain control during the sell down.
Interesting point as regards the bank guarantee- Last one I claimed on with ANZ was incident free but am doing another for a client at the moment which may not be smooth sailing.
Needs further investigation.....
Well in my opinion you would need to setup a owners corporate to deal with the common area issues this would lead to quite higher occupancy costs in the eyes of both tenants and purchasers.
not to mention you would be losing most of the powers you have being the sole owner, whilst you may retain ownership of the larger retailers you may be voted out when they discuss issues such as tenancy mix, maintenance contracts, centre management etc etc,
I am not saying that there is no money in it but I am managing tenancies for a building on behalf of 20 owners and it is a nightmare for them they all want out but they don't agree on where to go, what to do, how much they want to pay. Due to this tenants will not move in and unit holders can't sell due to some stupid legal action about the damn roof.
but more then happy for you to prove me wrong.
Also I thought I read somewhere that the site was located in NSW don't recall where I got that from.
I was under the impression that WA retail was closer to commercial then all other states seems I was mislead reading some of this s..t.
it's my understanding of the strata titles act that this would only apply if each individual title had each an individual owner.
if Dazz strata titles, but owns all the titles, then Dazz is the body corp and can have one AGM with himself in attendance and dissolve the need for a body corp by writing a letter to himself.
i'm pretty sure the individual value of each shop goes up upon strata titling because the bank suddenly has a plethora of smaller, different titles to lend against, versus one huge title encompassing god-knows-how-many shops with just QS details on NLA/plate area.
mitigates risk, makes them easier to move therefore the value technically should go up because they become more accessible to a broader audience.
iut's much the same in resi - recent example whereby one person owns a 2 storey pack of 10 (2x1) flats - 5 top, 5 bottom.
all on one title, worth about $2.2mil. unsure what they actually paid, though.
once strata titled, the values went to $3.4mil, because each one could be sold for market value of a 2x1 - $340k.
that's all the purchasers did. bought, strata titled and sold.
50% gross paper return in 7 months - and probably about $130k in titling and agency costs.
I don't think the block of flats example works in retail. The bank are going to want it valued in one line as opposed to indivivual gross realisations as suggested.
The worser situation is being able to sell some but not the whole project and be faced with a fractured owners corporation each driving their own agenda. I would only strata if i was going to sell the whole lot.
another risk is you goto strata and suddenly you have to upgrade for fire, diasbled access etc
The worser situation is being able to sell some but not the whole project and be faced with a fractured owners corporation each driving their own agenda. I would only strata if i was going to sell the whole lot.
another risk is you goto strata and suddenly you have to upgrade for fire, diasbled access etc
are you sure?
because last time i checked, someone selling a whole office block was getting less per sqm than someone selling individual parcels of 50/75/120/150/180/240sqm etc office spaces in the same complex 3 doors down.
Ah that might explain it, I have zero exposure to anything in Sydney, let alone the comm office market. Cheers.
One thing i will point out here, as a general rule of thumb, higher valued businesses have a lower ROI than lower valued businesses.
Why?
because with higher valued businesses, the owner doesnt need to 'sweat' 24/7 in the business.