Opinions on two commercial properties

[John M]

Hi John,

Thanks very much for your thoughtful and informative post.

Many good ideas which I shall take on board. A few issues:

1. I am not sure that there are many full time buyers agents for commercial properties.
2. Comparable market rents are hard to ascertain with no ready source of info unlike resi rents where a quick search of realestate.com.au. will suffice
3. The disappearance of tenants is a major concern - is there insurance for this?

No problems, happy to provide general advice as I don't want to see you get caught buying something which will give you nightmares.

1) I don't know any well, but there are some out there. Not sure what they charge either, but maybe worth looking into.
2) Commercial rents certainly can be a bit more difficult but can be ascertained by looking at realcommercial and then talking to agents to see what sort of incentives are being offered (ie rent free periods, contributions to fitouts, negotiation on advertised rents etc) and what vacancy rates and 'time on market' are like.
3) Buy numerous smaller properties and don't put all your eggs in one basket - that's the best insurance in my mind. That way if you lose a tenant you might be short $50k pa but still receiving $250k pa rather than being short the full $300k pa for potentially a year or more if something goes bad.

Another story for you.. We manage a property where there were issues with the tenant and there is an ongoing lawsuit. The owner has not received rent for approx. 9-12 months and can not even get access to the property, but has been pouring tens of thousands of $$ into legal costs. Now imagine if this was your only property..

I don't mean to scare you, I'm just warning you that unforseeable events can happen and it is not a great idea to put all your eggs in one basket.

 

[geoffw]

Hi John,

Thanks very much for your thoughtful and informative post.

Many good ideas which I shall take on board. A few issues:

1. I am not sure that there are many full time buyers agents for commercial properties.
2. Comparable market rents are hard to ascertain with no ready source of info unlike resi rents where a quick search of realestate.com.au. will suffice
3. The disappearance of tenants is a major concern - is there insurance for this?

One agent was mentioned earlier in the thread. He should be able to help you with point 2.

 

[china]

No China.....normal rates buddy.

Aaron, are you saying that I can obtain a loan to purchase commercial property at around 5%?

 

[Dazedmw]

The first thing I would say about long term "37 year" long leases is that options are a generally a negative not a positive for the landlord. Option terms are there for the benefit and offer convenience for the tenant.