Vendor finance - be alert or be alarmed?

[wobbycarly]

With the recent flurry of threads regarding commercial, I thought I'd sniff around our area to see what's about.

Came across this one.

One thing that caught my eye was this line:
"Up to 75% vendor finance available to approved applicant at 7.5 % p.a."

This indicates to me that the vendor doesn't need the money, and based on current rent/asking price, it's returning about 7.8% gross. Why?

There is a lease for another 3 years - no mention of options, so I wonder if the tenant has indicated they will leave... Anyone else with some thoughts?

 

[Aaron_C]

Looks like a quasi-specialised security and they want 7.8% gross yield? haha...no wonder why they're offering vendor finance @ 7.5%. I would to if you paid me that much for this

 

[Bird Dog]

Run run run as fast as you can....

Shocking cap rate for a specialised property that the previous owner has probably already depreciated the bejesus out of and owes nothing hence the offer for Vendor finance.

Although I wonder how much it would cost you to fill in the hole with concrete and turn it into a sports centre...,Hang on.. you can't do that either as the roof is to low..

Next....

 

[wobbycarly]

Didn't think it would be a great option, but was trying to understand the finance side of it.

 

[Bird Dog]

Didn't think it would be a great option, but was trying to understand the finance side of it.

Yes, I got the gist of your OP Wobbly as I knew you were not considering it and just wanted to post an example for the sake of discussion. EG Vendor finance
I think more of these should be posted for discussion as to me, knowing what to steer clear from is equally important as what buy..

Please post more..

 

[battler]

It's kinda sitting in a cow paddock though.

http://www.realcommercial.com.au/property-retail-vic-kerang-5708783#

 

[Bird Dog]

It's kinda sitting in a cow paddock though.

http://www.realcommercial.com.au/property-retail-vic-kerang-5708783#

Ah, that's another interesting one Battler.

Three major points I see..
1: The store still has the old Safeway logo and has not been dressed up with the new "woolies" logo. Which tells me (perhaps) that they aren't bothering to update the store as they don't intend on renewing the lease.

2: Point 1 is further verified by the lack of any lease terms in the listing. The first point that should always be mentioned in shopping centre sales is the lease terms as they really are everything with that type of building.

3: I've only visited Kerang once and cannot recall the outlay but according to google maps, that building is not on the main drag either. I could be wrong but the main areas of some towns are usually indicated by angle parking and although there is some there, none of it's sits near that building.. Click on the map on the right and then enlarge.

Let's say for arguments sake however that was the case and they are moving on. If you knew the area demographics exceptionally well, you might try and tie it up with an option and then start canvassing a Dan Murphy's or super A mart for a possible refurb and long term lease as these guy's (well Dan's anyway) now have such a market presence they don't' need to be on the main street (see point 3).

I'm sure there's more I've missed..

B.D

 

[wobbycarly]

Yes, I got the gist of your OP Wobbly as I knew you were not considering it and just wanted to post an example for the sake of discussion. EG Vendor finance
I think more of these should be posted for discussion as to me, knowing what to steer clear from is equally important as what buy..

Please post more..

Had a lot of fun this morning perusing the 12 pages of commercial that came up in the search for "3220 - include surrounding suburbs". Turns out that half of Gheringhap is for sale! Like Monopoly Also an ex-Centro centre - made me think of Dazz's most recent (I think) project. Bit too big for a beginner, methinks!!

Would have loved someone experienced in commercial to be looking over my shoulder and tell me what to ignore, and why.

"Prime Development Potential" was off the list, as was "Vacant Possession", although vacant can have it's benefits, no doubt.

It's kinda sitting in a cow paddock though.

http://www.realcommercial.com.au/property-retail-vic-kerang-5708783#

Hey, that's my birthplace - don't knock it! (The town, that is, not the Safeway!!)

 

[battler]

Which tells me (perhaps) that they aren't bothering to update the store as they don't intend on renewing the lease.

2: Point 1 is further verified by the lack of any lease terms in the listing.

Yep, the ad says vacant possession.

Interestingly the Printing Works at #22 Nolan st has been sold and is supposed to morph into a Chemist shop.

I wonder where that leaves the house in between?

 

[Bird Dog]

Yep, the ad says vacant possession.

Interestingly the Printing Works at #22 Nolan st has been sold and is supposed to morph into a Chemist shop.

I wonder where that leaves the house in between?

The funny thing is the term (or how that box is populated) isn't always correct Battler.

I've seen ones listed as "tenanted investment" and clearly the place will be vacant and then others stated as "vacant possession" but then further down the listing the agents states new 2+2+2 year lease..

As for the house in between...maybe a doc surgery or an A.A meeting centre for the Dan Murphy's customers...

 

[BMan]

it actually says

Listing Summary

Tenure Type
Vacant Possession