I posted a ‘help wanted’ on the 13th, but although it is being read, no one has replied. Have done a search but nothing comes up. Anyone any advice on: truck Depot 5plus5 lease. rented at 1650pm annual CPI increase (?) selling at 220,000. More detail re size and location posted on 13th. Please let me know thoughts on this.[
]I’m no expert in commercial lending or leases, but the max LVR by most lenders is 66% for commercial loans, to purchase the property.
Er, um what’s LVR??[
]Loan To Value Ratio
Another words max loan amount, lenders will lend, based on the valuation figure.
$100000 purchase price
LVR 80%
$80000 max loan amount
Thanks Picja, I am overwhelmed, teary eyed at the very thought that someone out there in the ether has replied!![
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Hmm, so I can check that out with the manager. So Let’s say I could come up with the 40% are commercials as safe as houses (Ha! finally a literal meaning to that expression!) I shall stay on line for a few minutes more with baited breath!Sorry, if I’ve missed you, went for a coffee break[
]I can’t really answer that question. You need to do your own research on the security of the property.
My main concern would be, is it a property that can be rented quite easily, if current tenants decide to move on. Also the potential of selling it. Would it be easy to sell or hard? This is only my thoughts on what I would need to satisfy if in the postion.
Like I said, previously, I haven’t had much experience in commercial lending or properties
as I am mainly in the market of Home Loans, Personal & Car Loans, DIY Superannuation.However, if you ever need me to run something by a lender for you only to happy to assist.
The lease agreement is very important with commercial properties. It’s going to have to be part of your due diligence. It should deal with stuff like who’s responsible for maintaining which parts of the property, default procedures, etc.
There are also additional risk factors with commercial property, some of which may be unique to the particular use of that property.
For example, what are the potential problems with a truck depot? Excessive loading or wear and tear of vehicle driveways and parking/loading areas? Contamination of the ground by leaking/spilled oil and fuel? These things could cost a lot of money to fix up (or “make good”, in lease-speak). Part of your due diligence will need to involve checking whether these could be a problem in the future. Also, does the lease impose any responsibility on the tenant to fix any of these problems?
You also need to work out the GST issue. For example, if you’re registered for GST, you may be able to claim the going concern exemption when you buy the property, and don’t have to pay GST on the purchase price. If you’re not registered for GST, you’ll have to pay 10% GST on the purchase price – I don’t know if you can claim that as an expense – it may go towards the cost base of the property. Also, if you’re not registered for GST and collect GST on your rent payments, that’s illegal. Tricky eh?
What it boils down to is: Know what you’re getting into.
Cheers
M
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