Hi All,
Was hoping if anyone can offer moral support/how to stay calm and cool advice for a commercial property investment that has gone to say the least – given me plenty of heartache than any joy.
Problems encountered:
1. Sold my great little residential investment that has no skyrockted in price and rental income to buy this lemon. It is now worth nearly double what I sold it for back in 2006.
2. The current warehouse has just undergone a $25K roof repair – of which I was not aware of until moving in, I inspected EVERYTHING EXCEPT THE ROOF, which had asbestos (luckily not the entire roof).
3. Prior tenant was a problem, payments were late, property was not left in a good condition – had to repair plasterboard holes, ceiling tiles as well as repainting the office walls. Agent was weak and basically gave back the bond despite my protests the condition left was inadequete.
The only upside to this is that I can take relief in that I don't owe any mortgage on this….and I'm not considering selling….
The most frustrating thing is, however, finding a suitable tenant and growing distrust of the agent:
1. It has been on the market now since Aug 2010, circa 7 months to today. I know it's not residential property where you'll find a tenant within weeks if not days, but this is increasingly causing me sleepless nights.
2. The agent gives me every excuse of why each potential tenant rejected the property, despite the fact that it was never advertised to be a state of the art place. We clearly stated in the ad it wasn't a high roof, yet this was the main complaint??? Others have commented the rental rate is too high – I'm asking $28,000 + GST + Outgoings for a property on a block at 780m2.
Did my homework and found that across the street there are warehouses asking for $38,000, high ceiling, new warehouses but for 300m2?3. I know every commercial/real estate agent lies, but this is getting ridiculous, since late Oct 2010, <moderator: delete language>: every week, I get a potential new tenant …ones who seemingly are on the brink to put me an offer but two days later, deal falls through, either the potential tenant has bad credit records or has not responded or called back. It gives me false hopes and impressions, yet I don't exactly know what to believe now or if it is genuine.
I've gone back to the basics and seriously looked at where the problems are in order for me not to make any further rash and wrong decisions:
– Tidied up as much as I could and repairing as much as I could on the building to the extent that there are no leaks etc. and that for it's age, it's in good condition. Building was built circa late 60s/early 70s.
– Kept an eye on surrounding properties to see how quickly they rent out if so then there is a problem with my agent.
It's getting very frustrating to say the least….but I'm ploughing on.
Thanks.
Hi Will,
1. 7months, painful but not unheard of with industrial property.
2. Tenants generally pay for the ‘useable space’ ie the factory space, offices & hardstand areas. If there is high clearance, then there is a greater cubic storage (useful for high bay racking), hence rents can be 25-50% higher than lower clearance spaces.
3. At present, there are a lot less tyre kickers around, so I would be a bit concerned about the agent.Which city is it located? What is the factory size? Is the rent reflective of the condition of the premises? What’s the zoning? Have the leaks been fixed?
It may be time review the Agent’s performance.
Hi Scott,
Thanks for your response:
1. Located in Melbourne, Inner West to be exact.
2. Factory size is about 700m2 of usable space.
3. Business Zone 3
4. Rent is what I would consider market value of the premise, going rate is currently $28K + GST + Outgoings for 700m2. As I said in the earlier post, nearby rents are nearly double for half the space, but true, they do have high clearance and and are a lot newer.
5. Leaks have been all fixed and patched, I don't think you can fault it for the size and asking rental price.I also agree with Scott that it is time for reviewing the performance of your agent. Try to get a better agent. In that note you should take recommendations from people you know so that you can trust the work and words of the new agent that you select.
It definitely has been a tough time for commercial property, with plenty of empty places & turnover, but things appear to be picking up again.
I also agree and would be reviewing your agent. Look at similar properties in the area that have been leased recently, and find out which agents leased them. Before signing up another agent, I would be talking to a few & getting a feel for the market.
Might help to review in detail all the ways the agent is marketing the property, assuming you've been getting advertising invoices.
Put signs on the fence and building for those who want to expand in the area or are driving around prospecting.
List with 2 other agents, competition creates urgency and activity.
Insist on being included in tenant vetting procedure so you know about every enquiry before any are declined.
Letterbox drop the industrial local area in case anyone wants more space nearby.
Good luck
Cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
Thanks Will,
set up your action plan:
* Arrange a face to face meeting with the agent
* review current marketing strategy
* review all of the prospects that they have brought through the property
* listen to what the agent has to say about the property (and all their excuses, failings etc)
* ask them what they are doing to lease the property
* ask them to suggest how they are going to stem the flow of money from your wallet
* ask them what they want you to do to achieve the resultsthecrest wrote:Might help to review in detail all the ways the agent is marketing the property, assuming you've been getting advertising invoices.
Put signs on the fence and building for those who want to expand in the area or are driving around prospecting.
List with 2 other agents, competition creates urgency and activity.
Insist on being included in tenant vetting procedure so you know about every enquiry before any are declined.
Letterbox drop the industrial local area in case anyone wants more space nearby.
Good luck
Cheers
thecrestThanks.
The current marketing strategy is to advertise on the web, we have a sign on the building (billboard like style so it's pretty big).
I'm not sure if he has a large database of existing tenants or if he has a large network of contacts, but I doubt it.
As to the vetting process…well, initially, it was relatively quiet, I didn't hear from him and vice versa. By the 3rd month, I had started call him for weekly updates on the number of potential clients…
This is the area in which I think I'm most concerned about – there appears and I think he is lying but to what extent, that I have had at least 1-2 people visit (according to him)….here are some of the excuses I've had so far:
Case 1: Was going to open up a cash and carry like shop/warehouse for African goods. Reason: No licence as yet.
Case 2: Mechanic Reason: Insufficient Credit Funds/No track record of doing business.
Case 3: Cabinet Maker (there appears to be a few in area) Reason: Complained about how dust would fall from roof.
Case 4: Mechanic Reason: Did not return call
Case 5: Karate Centre Reason: Did not return call.
Case 6: Import/Export Business Reason: Did not return call.I held my hopes up for all those chances and got pretty worked up about it too, only to be disappointed every time.
With case 6, he made it sound as if the deal was brokered!!!! Only to find out it was not on Monday!
Hi willister,
I'm not sure if you have found a tenant but have you ever thought of giving a rent free period to help the business operator a leg up?
If you could find a tenant, get them to pay all out-goings, so at least you don't have to pay the rates, etc.
I have never owned a commercial property so I really wouldn't know if this is do-able.
Just an idea.
Angel
angelinsydney wrote:Hi willister,I'm not sure if you have found a tenant but have you ever thought of giving a rent free period to help the business operator a leg up?
If you could find a tenant, get them to pay all out-goings, so at least you don't have to pay the rates, etc.
I have never owned a commercial property so I really wouldn't know if this is do-able.
Just an idea.
Angel
Hi Angela,
Thanks for the advice…
We found a tenant (yay!) approx 2 months ago now…in the end, we gave him a free rent period of 1 month…which was in my opinion relatively lucky when considering that most others I know of asked for 2 and my friends who own commercial properties reckon 1.5 – 2 was the standard!
Regards,
Will.
Good to hear that you've got it away. Was it the extra pressure on the agent or some other strategy/agent?
Thanks Scott.
We kept with the current agent, in the end it was in my opinion, a case of right timing. As noted above in my old posts, I had set a time limit of 3-4 months before fielding other agents or even thought about doing the whole process myself and engaging a lawyer for the paperwork. I didn't tell him this of course, but I think it got to the point where he knew I was getting frustrated smart enough to read between the lines!
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