re:- how did you get starting with commercial investment properties

[kero]

hey folks,

we have just settled on our third resi IP. CG for the 2 IPs have been kind to us these few years. This third IP is apparently a growth area. So hopefully in the next 3 to 5 years or so, the CG in the three resi IP can give us more options to purchase non-resi IPs.

before settling on the 3rd IP, we were considering either commerical or industrial property investments. i made some quick calculations and if I purchase an empty block say, industrial and built a couple of warehouses, i would struggle to service the hold before leasing it out- the design, approval and construction processes. all this time with no rent coming in.

So, how do you guys do it? buy the property that has an existing tenant? or if starting from ground zero, what are the ways available or methods to keep afloat while the building is built? buy the land first and sit on it for a few years (claiming no interest, as it is not producing income) and wait for finance to improve? e.g. positive cash flow from other IPs etc.

The finance part was an issue.

any thoughts and ideas greatly appreciated.

rdgs
kero

 

[grossreal]

hi
I was reading the post and not sure if to post
and thats not a norm for me
your question is so big not sure how to answer it
I buy finished product as the norm
but we do develop with comm but its more the cream on the cake
there is so many things that go into buying comm that it would take maybe 15 posts
I look for a particular type but people in my groups look for lots of different stuff
I have shopping center guy that just buys those and we come into assit.
we have a farm buyer that we do the same
I have newspaper guy that just buys the 5sq hole in the wall news people.
I have a lady that just buys comm with accountants as tennants.
I have a guy that just buys banks or banks tennants.
I have guys that just invest in floor plates or part floors.
I have one group that buys whole a class buildings or a class shopping centers
and the list goes on
how did I get involved I fell into it
and have been investing with different people
some times people are not setup for comm its not for everyone
its not the same as resi
its stable but its not the huge increase or for that matter the huge drops as resi
so you have to know what you want.
for me I just look at the numbers and move from there

 

[fernfurn]

We really should have some input from Dazz here. He could write a thesis on how (I got) to get started in commercial and give us some interesting things that went on as I know a lot of the newer posters have never heard all this before

 

[cu@thetop]

Find the tenant 1st- then build. This tip alone is the most important one in my view to success in commercial property. Think about it.

 

[L and P]

Can you elaborate on finding a tenant first.

We are buying a block of land with plans to build but really have no idea where to start. Our usual bank guy is on holidays at the moment ( how inconsiderate ! ) and usually he would be able to offer some advice.

 

[cu@thetop]

Hunt a tenant out- find their current rental and offer them a better deal at the end of their lease and construct premises accordingly. Ring the up and see. Even better if you have a property in the area - put he sign - for lease by owner up for them to come to you.

Start small and work up. Do your construction costs first- aim for at least a 15 - 17% return p.a before borrowing costs, although you'll probably end up with less. Sign tenant up on an agreement to lease upon completion of construction.

Find the tenant, find the lot and the rest is achievable.

 

[kero]

so you are saying 'poach' the potential renter from their current rental location?

would you be so kind to give us the learners an example... need not be your personal experience

 

[cu@thetop]

Ask your accountant how much he is paying - then poach him .(example 1)
Talk to a businessman in a fish and chip shop (example 2)
Referral from your accountant (example 3)
Tender for centrelink (example 4)
Talk to leasing manager of a franchise not currently present (ie if Maccas is already there, call HJs) (example 5)

Just a few to think about- none are my deals but I act for clients who make big bucks doing it. I expect to be doing it for myself in a different fashion shortly. As for being a learner, relax, we all are. The day you stop learning is usually the day you die.

 

[Aaron Sice]

Ask your accountant how much he is paying - then poach him .(example 1)
Talk to a businessman in a fish and chip shop (example 2)
Referral from your accountant (example 3)
Tender for centrelink (example 4)
Talk to leasing manager of a franchise not currently present (ie if Maccas is already there, call HJs) (example 5)

Just a few to think about- none are my deals but I act for clients who make big bucks doing it. I expect to be doing it for myself in a different fashion shortly. As for being a learner, relax, we all are. The day you stop learning is usually the day you die.

spot on.

find the market and meet it. don't expect the market to meet you.

an exit strategy is the FIRST thing anyone should put up before investing in construction. without it, you are left holding the bag.

period. end of discussion.

kudos.

 

[Cashflow]

I agree with find a tenant and then build - it's a great way to invest.

But if you're not ready to put the additional work in why not buy an existing commercial property with a tenant in it?

Check out the following:

Yield return
Who pays for the outgoings?
Directors guarantees in case the business goes broke you can chase them
Term of lease - preferably three years remaining with a 5 year option
Tenant - government agencies are stable but may give you lower returns
Business profit and loss statement - is it growing, stagnating or declining?
Staffing numbers - increasing or decreasing?
Land tax
GST component
Insurances - who pays?
Can you add additional value and income - signage/phone towers?
Be aware that purpose built properties (ie childcare centres, fast food outlets) may be harder to find new tenants and also harder to find finance for. You will also need a larger deposit.
Be aware of a business (that owns the property) and is now selling the property. This could be a sign of the business not doing well and a need for them to cash out.

Whichever way you go just come to the forum and ask for help - there are so many different variables with commercial properties - every property/lease/tenant is different.

Keep us informed as to what you decide.

Peter
www.privaterealestate.net.au
www.cashflowcalculators.com.au