wanting info on purchasing commercial property

[pennyk]

Hi,

We are going to be purchasing some investment properties in the new financial year, and I've been wondering about getting a commercial property, rather than, or as well as!, residential ones.

I'm wondering if anyone knows any good resources about commercial property investment.

Also, if you any of you have any information on pitfalls and benefits that you might be interested to share with me. Also information on whether you need to be registered for GST - as a lot of the properties seem to be advertised as GST inclusive. and what kind of rental yields you should expect to see - both gross and net.

Our primary purpose in investing at this stage is cashflow, with a secondary goal of capital growth.

I'm looking both at NSW and QLD at this stage... and looking up to $500 000 price.

Thanks!

Penny

 

[bundy1964]

Hi penny

You might try here first

http://www.somersoft.com/forums/showthread.php?s=&threadid=9397

bundy

 

[INVESTRON]

It's harder to get finance on commercial - the banks want 50% and make sure you can afford to go for a long time without rent if your tenant goes, even if they have a lease.

I have both commercial and residential - when times are good, commercial is 10 times better; higher returns, better tenants, less problems, but it's not always easy to find a new tenant, you may have to reduce the rent a lot to fill it again.

With housing it's a lot easier to find another tenant and the banks will lend you more.

regards,

 

[Guy]

Penny,
I don't own any commercial , but have seriously looked a couple of times & have each time concluded that I can get a lot more leverage out of my equity sticking with residential (3 or less units),
& it's so much easier to get the loan.
Still, if a killer deal comes up you'd have to seriously look.

 

[geoffw]

I guess the definition of "commercial" can vary- and so do the conditions.

A year or two ago, I enquired into a residential unit on top of a shop. Bank would give 70% lend- that was not too bad.

But, the killer for me was that it was a P & I loan, with a ten year loan.That meant that the principal payments were greater than the interest payments- and, at the time, I did not have the cashflow available from elsewhere to cover the repayments.

 

[bundy1964]

Hi

I would agree that the cashflow is better from comercial than residential and vacancy rates can be a pain.

Another trap can be having a gross rent as compaired to rent plus outgoings, if property values continue to rise above inflation council rates can eat into your profits.

With a non bank lender you can gear up to 80%.

Depreciation is at 4% and there are benifts of being GST registered

Buying leased is easier to get a loan for than an empty place but empty may allow a lot of negotiation on price ( dont forget to include GST in your calcs on empty ) and the chance to value add up front to get the best return.

I did 5 years research on shares, residential, comercial and buying a business. I chose commercial backed up with shares.

Careful property selection is even more important than in residential and a check on the tenant if there is one in place.

bundy

 

[pennyk]

thanks for all your information

Thank you all for your replies. We will need to speak to our lender about their borrowing rules for commercial. We maybe need to wait until our next round of buying!

So, if you are GST registered, did you do that as an individual, or as part of a business structure.

I already have an ABN as I own/run a company, but don't really want to do property under that structure.

What kinds of checks do you run on your tenants?

Penny

 

[bundy1964]

Re: thanks for all your information

Originally posted by pennyk
Thank you all for your replies. We will need to speak to our lender about their borrowing rules for commercial. We maybe need to wait until our next round of buying!

So, if you are GST registered, did you do that as an individual, or as part of a business structure.

I already have an ABN as I own/run a company, but don't really want to do property under that structure.

What kinds of checks do you run on your tenants?

Penny

I did my ABN as a sole trader ( I should of done it as a trust )

I have a look at ASIC, ABR and do a web search on them. I am currently looking at a hair replacement business and a sleepware and undies maker I dont think I can afford the Giftware shop I looked at today if I want to share a place with the undies woman

bundy

 

[pennyk]

well it looks like we will be launching into commercial property.although indirectly

Today, I think I have finalised a deal I've been working on for a few weeks - to get an investor for our business.
One of their priorities is to find us a commercial property in Sydney, where we can operate and expand from. The company will then lease it from them
So, it won't be our money, but they've basically asked us to find something..... I don't really care whether it's mine or not, I just like the hunt for real estate!
Any suggestions on areas of northern/western Sydney which are not so expensive, but are good quality. We are currently sub-letting space in norwest business park in Baulkham HIlls. But it's so expensive there, and we'd prefer to get something that's likely to grow in value. All of our staff are from round the Hills District, so it would be good to stay in this area. All our major competitors are based in Seven Hills, so I think it would be best to stay away from there!
Thanks again for all your help!

Penny

 

[XBenX]

what floor space and facils do you require ?

 

[pennyk]

still working it out....

We need a small showroom, an assessment room, a meeting room and office space for about 8-10 people. Don't really need warehousing, just a small amount of storage space so the showroom floor doesn't get too messy!
I need all on one level and wheelchair access, for both staff and clients. and a reasonable amount of car spaces.
Penny

 

[XBenX]

sorry I will be more specific

space in m2 ?

i take it your product is targeted at disabled people ? and manufactured off site ?

do u need to be close to transport ?

where is your market based ? any particular area ? would sales be influenced if you were in the CBD / Western Sydney / Orange ?

 

[pennyk]

amount of space we need..

I am not totally sure how much space we need - we still need to do some business planning. Probably at least about 250m2.

Yes, focusing on people with disabilities, so prefer to have one level. We may employ people in wheelchairs - so don't want to have a mezzanine office if we can help it.

Don't really need to be close to transport, most people would come in cars/ taxis.

It would be best for us to be in western suburbs - between Parramatta and Castle Hill/ Norwest, or round Pennant Hills.

As many car spaces as possible! will need around 10 for staff and business cars, then additional 1-2 for clients.

Pen