G’day guys,
I’m seeking some general advice on investing in Commercial Property, and would appreciate it someone out there was in a position to pass on a little advice (pro/cons/risks) either through the board, PM or via email.
In particular I’m looking at the lower end: something like tilt slab factories. In saying that, I’d love the hear the advice & opinions of others, Im very open minded.
Thanks guys, i figured this is one of the best places to find a guru or mentor.
Cheers,
Batts
hi batts
this questions comes up all the time on this forum. If you do a search on commercial property, I’m sure you will find what you are looking for.We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582Talking about Sydney (its what I know ) have several clients with a total of around 10 in last 8 years. Pretty average cap gain with great rentals.
No problems really in this period as the economy has been great. Remember these same guys in 1990-92 picked some of these up for 120K when they had been listed by developer for over twice that. (bought from administrator ) Vacancies very high, 6 mths free rental in 3 or 1 yr in 5 pretty common.
If you can ride out a possible slump, and although we have not had one in 13yrs they do happen, they would be a good part of your portfolio.
Thanks guys,
I’ll troll through the forum and see wht I can find.
There definately seems a void of information out there about Commercial – I can see why Dolf De Roos has started conducting seminars on the topic.
I suppose the positive aspect is that there should be less competition out there when buying!
Thanks again ,
Cheers,
Batts
Commercial
Pros-
~Higher CF
~Tennants pay for outgoings (usually)
~Sometimes higher depricationCons-
~Higher Deposit Required (Minimum of 30%, usually more like 35%)
-Once a tennant moves out it can be much harder to attract a new one (unless you offer cash backs, which decrease your yield – city offices).
~Can be much higher risk:
-Can have much higher highs and lower lows than residential.
-Commercial RE Markets can be very independent from the general property market (so just because residential rises don’t think commercial will – though it can).
-Smaller market – with residential you can always sell to a home owner or other investor, but usually with commercial there is alot less buyers (only other investors).Of course this is rather academic as it depends on what type of commercial property.
Hellman
Thanks Hellman,
Appreciate your reply, you have reinforced a lot that I have read about the pros and cons.
I have read that the value of a commercial property can be somewhat linked to the lease in place. A secure tenant with a long term lease increases its value.
Is there any logic to the following:
Locating a property (like a factory) which is vacant with a motivated seller. Then either have the vendor sign a NEO (non exclusive option) for you to buy, or if not then simply try to source a tenant whilst it is on the market. Once a tenant is found sign them into a lease subject to the purchase.
Will the lender then be prepared to lend more against the value of the CP now that a lease is in place?
Also I assume that vendors of CP’s are more willing to accept ‘creative finance” terms, suck as either lease optioning or providing vendor finance?
Any feedback appreciated guys….
Thanks..
Residential / versus / Commercial
* Rentals quoted monthly or weekly / Rentals quoted annually
* Tenants have little interest in maintaining or improving the property / Tenants have a strong vested interest in keeping the property looking good and functional, and even improving it
* Leases are nonexistent or tend to be short / Leases tend to be long
* Tenants phone you for minor problems / Tenants tend to fix minor problems
* Bureaucrats tend to stick their noses in protecting the rights of the tenant / Bureaucrats tend to leave you alone
* Capital required to buy can be minimal / Capital required to buy can be large
* Banks will easily lend up to 90 percent and more of appraisal / Banks will lend only 50 percent to 60 percent of appraisal
* Appraised value when empty is not much less than when tenanted / Appraised value when tenanted may be two or three times the value when empty
* If the property is empty, it is usually easy to find a new tenant / If the property is empty, it may be difficult to find a new tenant
* For a large sum invested, the management overhead can be high / For a large sum invested, the management overhead is usually low
* You deal with people / You deal with contracts
Thanks Christian,
I have read some of those for/against in Dolf De Roos book “Real Estate Riches”, but I haven’t found too much else around. Dolf has an upcoming seminar (4hrs) specifically on Commercial Property so I’ll try and attend that, and no doubt have a look at the course he’ll be selling
Cheers,
Batts
Only the second post for me but here goes.
Having attended a Dolf De Roos weekend seminar a couple of years ago in Sydney & forked out big dollars, which I could have saved myself as I had read his book & there was nothing new to learn at the seminar which wasn’t in the book I paid $40 for. There were no lecture notes given out just a nice plastic folder with blank pages you had to make your own notes.
Knowledge is a good thing but don’t be fooled into paying big money when it’s already in print at the book store.
Good luck with your commercial adventures, we have two commercial props & settling on no 3 next week. I prefer commercial to residental but that is a personal prefence
hi batts71
I have both and its good to mix.
Its actually easier to get the lend before the tennent signs as once signed the value of the property is depending on the lease mine are 5 x 5 and 6% cpi increased (if the cpi is higher they pay that rate)(1 has a commercial tennant,they want the option to purchase soon, comming out of lease in 2 years.)here to help
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