whats the downfall?

[Belu]

Saw this in the Sun today:

http://www.realcommercial.com.au/cg...=&fmt=&header=&c=72507609&s=vic&tm=1191304239

It mentioned the sale was expecting over $500k, but even at say $600k it would be 13% return, so with a min 70% loan ($180K deposit/security) you would be about $45k CF+ a year.

I cant see a draw back? it should even have decent CG, and with a 8 year + 8 year extension on the lease seems like a good deal?

Anything im missing?

 

[Sunfish]

The $200k deposit?

That and the fact that they want $1.3mill. ie 6% yield.

 

[WillG]

mmm. $200k deposit. Would that suggest a price of $1mil+. Yield comes down to 8%.

No longer CF+

Where is the $200k and $500k+ mentioned ?

 

[Sunfish]

mmm. $200k deposit. Would that suggest a price of $1mil+. Yield comes down to 8%.

No longer CF+

Where is the $200k and $500k+ mentioned ?

Such commercial property can only be financed to 60%, hence the $200k (on the original assumption). The $500k was a misprint in the Age. They are asking $1m3. How do I know? I rang the agent. LOL

 

[Belu]

haha well then there is the downfall! I was thinking "what $1.3mil???"

now very much not CF+ and a hefty deposit!

 

[Dazz]

All the hard work is done belu....

The Vendor has just signed up a 8+8 starting in July 07 for a decent rent in a nice looking building with a pretty decent tenant.

Do you really think someone is going to hand you a 13% nett yielder for no work ??

To get 13% yield out of property, in today's cut throat property world you have to do a bit more than just surf the net clicking away......but then, deep down you probably already knew that.

 

[Belu]

yup, thats why i was asking, it was a case of "too good to be true" and so it wasnt!

 

[Sunfish]

yup, thats why i was asking, it was a case of "too good to be true" and so it wasnt!

Hey! I'm God's Own Country (Nth Qld for you Mexicans.) and it only took a phone call. Remember Do Your Own Research.

Had you found a genuine bargain I would have been bidding agin 'ya.

Note to Dazza: I am not suggesting the vendor does not deserve his price.

 

[Belu]

no you wouldnt have because im not in a position to invest

 

[lizzie]

No longer CF+

i've noticed that with most commercial nowadays - in our area they tend to be not much of a better investment (return-wise) than residential if a tenant is in place.

i guess the way to go is like daz, buy vacant and create your own tenant. to risky for me at this stage .... .... but i do love reading about it.

 

[Dazz]

i've noticed that with most commercial nowadays - in our area they tend to be not much of a better investment (return-wise) than residential if a tenant is in place.

Sitting on the sidelines, I reckon that's cos the residential Landlords currently getting 3 or 4% gross yields are over the moon to buy stuff at ridiculously low nett yields of 5 or 6%.

Once again, all depends what your standard frame of reference is. A 6% nett yield is rubbish if you are used to buying 8 or 9% nett yield, but it's fantastic if you are coming from a residential background.

With the increase in people's net worth nowadays, there is a steady transition to the comm. (dark) side I believe. I have no statistics to back this up, just a casual observation.

When the place is empty or derelict, that is when you pick up the real bargains, clean it up, source a new tenant and sign them up on a long secure well paying Lease. This is where you get the good returns, but obviously the risks are higher, and completely unpalatable to most folk.

 

[lizzie]

A 6% nett yield is rubbish

i totally agree - and i can currently get a 6% yeild on res. i wouldn't buy commercial (atm) unless the rent covered the underlying mortgage because i would be borrowing the lot (via loc's etc) and when you're talking million's in purchase price, it would kill me.

for similar reasons, i'm not quite brave enough to buy a dump, clean it up and try and find a tenant - my fallback cashflow isn't quite there yet if it takes longer than anticipated to find one.

that being said - i have found a beaut vacant block in the middle of a light commercial area (500m2), with wide rear lane access and relatively cheap ... hmmm ... do i feel brave? would, with a block like that, one be best to build a shed (or series of sheds) with drive access on it? or would one be best to leave it vacant and the tenant can put on whatever they like?

food for thought.

 

[Dazz]

Lizzie,

I'm regularly sent a series of RE ads from a quite pro-active comm. agent (I think it was Colliers ??) who just flogs off stuff in Newcastle.

I'm not interested in the offerings, but it maybe something you and Simon might consider.

When he sends the next one, I'll flick it thru to you if you wish.

 

[lizzie]

that would be great daz, but i may not do anything commercial at the moment - i'm currently sorting my portfolio out from having too many fingers in different pies and would like to settle a while on the resi development track, get some equity and cashflow behind me, before moving onto the next stage ...

... that being said - i do love looking and thinking and plotting!