What if you were just starting out in commercial investing?

[emptyvessel]

Hey commercial gurus,
I have a simple question for you. I am very interested in the responses as I am at a crossroads and commercial realestate is one of the paths I have been interested in for some time.

If you were just starting out in commercial investing, and only had up to say, $150k to play with what would you buy?

Would you even bother? i.e. Is the "effective" entry price into the commercial way to high for someone with only $150k to play with? Better of saving more or going back to resi for a while?

Or would you get creative seek some sort of consortium/joint venture to get a "leg up"?

Thanks,
EV

 

[chilliblue]

Wait until you have substanially more unless you intend to use the premises for your own use.

 

[emptyvessel]

Thanks. I suspected as much.

What is substantially? $500k+ so you can hit the magic $1m mark that gets thrown around sometimes?

 

[Bird Dog]

Hi EV,
Is that $150K in hard cash
OR
$150K in equity in another property
OR
$150 of borrowing capacity.
or
Other..??

Also, do you have much equity in residential property?

How you answer will have a bearing on how others answer your post.

At any rate, its not a huge amount to start with but let's see your answer and maybe we can offer some suggestions..

cheers

B.D

 

[emptyvessel]

Good point. I should have been clearer.

Lets say $150k in other property or properties. All vanilla resi.

 

[Bird Dog]

Well, that's a little more info.. cheers..

You're most likely looking at a 65%-70% LVR on commercial which means if you were to release $150K in capital, your absolute max would be around $450 (not incl closing cost).

Can you purchase commercial for $450K...sure you can.. would you... that's another question entirely but yes, it is possible.
It all depends on your risk factor and perhaps also if you're comfortable purchasing regional as thats where a lot of your properties will be in that price range.

If you're wanting to get into commercial for the nice tenants who pay for everything (all outgoings) well they typically won't be in the $450K properties.
You'll most likely get start-ups or small mum and dad businesses who don't understand leases and who aren't used to paying when the toilet burst a pipe.

You also hinted that the $150K may be tied up in multiple properties so this may add to your borrowing difficulties given the funds will need to be released from multiple sources (but I'll leave that to the brokers to give you a better answer).

I would probably say keep saving but then again I hate being the kill joy for anyone wanting to make the jump into commercial as I certainly got a lot of opinions when we first made the move and if we'd listened to them, we'd still be trawling the resi ad's looking for that illusive resi property less than 3 Klm's from the Melb CBD returning 9% on a 5 year lease..

All the best

B.D

 

[Aaron_C]

The smaller the number, the less attractive the commercial property is.

 

[emptyvessel]

Great advice folks. Thanks for taking the time.

I will read and ponder all of this for while.

 

[lizzie]

This is a good thread - full of advice from comm players - when I was in a similar situation as you.

http://www.somersoft.com/forums/showthread.php?t=73144&highlight=lizzie

 

[emptyvessel]

This is a good thread - full of advice from comm players - when I was in a similar situation as you.

http://www.somersoft.com/forums/showthread.php?t=73144&highlight=lizzie

Thanks lizzie, I knew this path had been walked before! Just couldn't find it because the undergrowth covered it