2 buy or not 2 buy that is the question??
Hi AllFound a great commercial prop that is currently leased out to a dentist.The lease is due. Done the sums the return is great. The problem is the dentist is only prepared to sign a 1 year lease.
Any ideas??
why not throw away $35.00 and run an add looking for a dentist to fill the proeprty…. if you get no response…. then you may have an issue filling it when lease comes up…. if you get lots of response… you can then find one that will agree to longer term (3 years) and once you have this sorted out … Serve the Sucker!-the old dentist…
I would sign the one year lease without an option period and once it is signed, I would inform the dentist that the lease will not be renewed at expiration and spend the next year finding a replacement tenant.
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
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Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltdjust being inquistive
what exactly is great about a one or less than one year lease on a commercial property?
i appreciate the return is ‘great’ on current figures, anything else?
cheers
brahms
Mortgage Broker
[email protected]There is nothing great about it except that it is the only term on offer. Better one year than nothing!
Robert Bou-Hamdan
Mortgage Adviser0414 347 771
[email protected]
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdYou would have to ask if the dentist were to move out, how hard would it be to relet, and how much could you get?
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Tell me the property is not owned by the actual Dentist
Byronent
Adelaide SABuying commercial property is not the same as residential. Whereas generally any house will let if the price is right the same does not necessarily apply to commercial.
As with any investment look at your downside risk first – that is what would be your likelyhood of tenanting the property should the current tenant walk in one year? If you determine it would be difficult you have to ask yourself if this is the right investment for you – it wouldn’t be for me.
However if you think there would be good demand for the property at current rentals than you have a greatly reduced risk. Some tenants don’t like to commit to lengthy leases but actually keep renewing their lease and end up staying for years – but you can’t count on this.
If the tenant won’t take a long lease I would be less inclined to offer too many rights-of-renewal. The right-of-renewal only benefits the tenant (but not the landlord) as it secures for the tenant the right to renew the lease without the obligation.
Without the tenant having a right-of-renewal you can put the building out to the general market in the hope of securing better terms.
Remember that banks don’t look favourably on short leases with commercial property, and unless you have alternative security in say residential property they may cut back on the percentage they will lend.
The banks are also likely to insist on a registered valuation – and the value is determined, to a degree, on the strength of the lease.
If it is an owner operator selling watch they aren’t paying an above-market rental to try to push up the value of the property – which after the tenant walks you will then have to let out at the true market rent.
Best wishes,
JulianThe problem is the dentist is only prepared to sign a 1 year lease.Just a few thoughts to contemplate:
1. Was the now-expiring lease only for 12 months too? If not it could signal a problem with the dentist as a continuing longterm tenant. I would also use the now shorter lease to buy more cheaply – the premise is no longer prime.
2. How long has the current tenant occupied the premises?
3. Where were they before?
4. Why are they prepared to only sign a 12-month lease? Are they planning to move? Close the business? Semi retire?
5. How many practising dentists are in the business? Do they use subcontractors?Once I had all this due diligence available to me , I’d be in a better position to plan my strategy.
Don’t forget to assess the strength of the current tenant. Call for most recent 3 years of accountant-prepared financials and the matching tax returns.
Want an out of the box thought?
Take an option to buy the business too. (yes, the dental practice).
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