Positive cash flow

Has anyone had experience with buying and renting strata factory units.

A "near new" factory unit for sale $285k with tennant on 5x5 lease weekly rent $450.

What are the issues/pitfalls.

Any depreciation available?

To compare the very next suburb has basic house at $299k and rent out at $225 weekly.

Are afctory units the way to go?

Scott
 
factory units

These can be very attractive as the leases are long, tenant pays outgoings and the returns can be high.

Disadvantages include lower LVR and higher rates from lenders. Longer vacancy rates and often the capital growth is linked to the rental return which can be a pos or neg depending on what the residential market is doing in comparison.

Basically if the yields are higher then you are buying at a discount to the residential market. Why is that?

I think that this sort of thing can be part of a balanced portfolio but of course I am no expert!

Cheers,
 
Hiya

I have a client who is an agent for one of the larger commercial leasing firms. His view is that these things provide a very good investment with the basic caveat that one needs an ANCHOR tennant, not some small motor mechanic or the like.

The logic being that when the economy goes to custard the little guy will walk leaving you with no income in tough times.

Ta

Rolf
 
Agreed, our SMSF owns some strata factories - the yields are great, vacancy can be a killer though, so make sure your tenants business plan is a good one.

When buying com/ind/retail location is critical. If the location is bad for your tenants business then if will mean problems for you. So when purchasing consider what type of business would do well in the location and make sure that is not just one industry. (the same goes for fitout) - some good ideas in Airey - Property Investors Handbook

Just make sure you can service the debt in vacancy, if you average it out cg and yields have been fantastic (but that its correlated to the extra risk)
 
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