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The article states that approximately 800,000 properties are vacant any one time. This sounds ridiculous. Doing a very rough calculation of an Australian population of 20mil and average household size of 2.4 people this equates to an approximate percentage of 9.5%.
Are they seriously trying to tell us that circa 9.5% of properties are vacant nation wide. AND who deliberately leaves their property vacant when they have the option of renting it out?
This article stinks of misinformation.
Hi Scott,
I can't be specific on the location since I'm still with my former employer and it is a very small industry.
The business is an even mix of leasing (not property management, just finding the tenant) and sales. I have no doubt the business will be successful since i've been through the hell of 07-08 when almost every commercial agency lost money. I can see substantial opportunity in markets that other agencies have neglected over the past 3 years.
If you have done any buying, selling or leasing in the commercial arena I'd appreciate feedback on your experience and suggestions on how the service can be improved.
Hi BDM,
The tone of your post says it all.
If you sell and pay down your debts the birds will chirp and the sun will shine. Over the next 20 years you may a little worse off financially, but I think you should realise the goal and take the cash. Then feel the sun on your back for the fantastic achievement you have accomplished.
The market is not going to make any significant movement in the next few years so you're not going to be missing significant growth.
Just remember – You've done it before, so you can do it again. Enjoy the next few years with your kids before they hit puberty and stop wanting to spend time with you.
Hi Wynyard,
You mentioned you're only earning $25k per annum. I'm not surprised you're struggling to service a mortgage.
I wouldn't be afraid of renting for the near future while continuing to invest spare capital in other avenues until your income increases to a level where you can service a home loan. You shouldn't be earning $25k forever. I think most people with a bit of "get up and go" have the capacity to earn at least $50k.
I used to feel the same way as you when I was in a job paying $32k and 24 years old. I'm now 29, in sales and earn between $150k and $200k per year. You sound like an inteligent person, once you finish your degree you'll probably be able to find a job with potential for growth. I know there's a bit of a labour shortage at the moment.
Think long term.
Thanks,
Doogs
Hi TV,
Population growth is detailed on the ABS website.
Rental yeilds are at the back of the Australian Property Investor magazine.
Good luck mate!
I'm an experienced commercial selling/leasing agent, and I wouldn't encourage you to screw the agents down too hard.
They're working for you and the fee they charge is their incentive to achieve a result. If anything I would try and get the marketing costs covered within the commission, thereby giving them more incentive to sell it.
If they go soft on the fee when you attempt to negotiate imagine how they're going to negotiate on your property.
My advice – get a great agent. If they're proactive the additional few thousand dollars spent will prove to be an excellent investment.
I think the balance is about even.
People aren't fighting over properties because they're correctly priced. When people start fighing over real estate you see swift increases in price, alternatively if there is a drastic over supply then prices soften.
Current statistical evidence is showing negligible gains and falls across the country over the past 3 months. I believe the gains over the past 18 months were due to the drastic reduction in interest rates in the wake of the GFC. For a brief period it was relatively easy to purchase cash flow positive properties in close proximity to infrastructure right off the shelf (no reno or development required). That time has now passed, interest rates are about right and there is an even mix of dooms dayers and active purchasers. The perfect mix for a holding pattern.
I also don't believe there are a glut of vacant properties. I work in the commercial property industry in Sydney and I can confirm that after a significant drop 12- 24 months ago, now space is beginning to lease and sell quicker than I have seen for years. Confidence has returned and experienced investors have returned to the market.
I've already got one unapproved granny flat and am looking at buying a relocatable cabin to put on another IP in Western Sydney.
I've investigated with council and spoken to a few agent and it looks like you can get it through under complying development, however it needs to tick alot of boxes.
If there is an existing granny flat then it needs to be BCA compliant. If it's old then it's unlikely to comply. Some things that are neccessary are:
– Minimum ceiling height of 2.4m
– Maximum floor area of 60m2
– Minimum of 900mm from neigbouring boundary and normally 3m setback from streetYou also need to get a private certifier to give it final approval. The whole approval will cost around $3k in Sydney, and that's assuming the dwelling doesn't need any alteration and you already have a site survey.
To run power you need to allow at least $1k for a separate metre, then the cost of running the cable. I haven't split the water since it's not a major cost and I don't think it's worth the cost of the separate metre.
If you try and advertise an upapproved flat on the internet the council will pick up on it and give you a notice to instruct you not to lease it. I advertised my flat privately and found a tenant within 2 weeks.
I hope this sheds some light on the world of granny flats.
No problems.
If you've got a tenant in place my advice would be:
– Maintain communication regularly and make sure the air-conditioning is working properly. You'd be surprised, but this is the biggest complaint we get from sitting tenants. A tenant isn't going to move just because the air-con doesn't work well. But it will make their day to day life less comfortable, so when an the lease is coming up and an opportunity comes up to check out other properties on the market they'll jump at it.
– Don't be soft in rental negotiations. Research the market before you approach your tenant to renew, most agents will give you honest advice on what to expect. I would start talking to them 12 months from lease expiry, and if I didn't have a commitment for them to renew 6 months from lease expiry I'd start marketing for another tenant. This will often push them to get their act together. If you're nice and let them float on a month to month you will lose out.
– Just because you're a nice landlord doesn't mean they won't bullshit you and move out. Commercial is all about the numbers, if the location isn't quite right or they have outgrown the space they'll move. If you can get onto them early before they've had a chance to think about it in detail you can sometimes get a commitment to renew the lease without any troubles. So start talking to them early.
Hope this helps.
Cheers,
Doogs.
Hi Guys,
I'm a commercial property sales and leasing agent in Sydney. I've been doing it for around 8 years and I'd like to share some insights for those that are interested:
– Investors with property valued between $300k and $3mil rarely do well with industrial or commecial (office) investments in my markets.
– Property can easily stay vacant for 6-12 months while looking for a tenant. A quick search of my listings shows that I've got over 120 properties that have been vacant for over 9 months. I've got a couple of small strata units owned by individual investors that have been vacant for over 2 years! This is even after we have reduced the price by 50%!
– Tenants expect incentives by the way of rent free, or cash contributions to their office fit-out to lure them to a property. This is generally a MINIMUM of 1 month per year, but can go as high as 4 or 5 months. So on a standard 3 year lease you can expect to offer between 3 months and 12 months rent free.
– Tenanted investments are often offered at above-market rentals. The owner will put a tenant in place for 3 years, offer them 1 year rent free at a higher figure then package the investment as showing an 8%+ yield without revealing the rent free period. When the property settles the owner will top up the tenant for the outstanding rent free payable. Remember, the document detailing the incentive is not attached to the lease.
– While a "typical" commecial lease passes on the cost of the outgoings to the tenant this is becoming less common due to the state of the market. Around half of my transactions now involve a "gross" lease whereby the tenant pays the rental and the owner pays the outgoings.
There is money to be made in commercial, but the real opportunities are over $3mil where you are attracting larger, higher quality tenants and you are not competing with as many investors to secure the opportunities.
Any questions please let me know, I'm happy to help out.
Thanks for all the advice.
So if I'm making an annual reportable income from the profit from these projects will the bank take this income into account when assessing me for a loan?
I'm thinking of doing a few project while still employed to prove to the financiers that I am capable of providing a regular income through this.
Has anyone done this before?
Thanks for the response Richard.
Is your income through rent received, or from renovating and selling?
If it is from the rent being recieved, how long did it take you to to build up a portfolio of properites generating enough positively geared income to service the dept on your investments?
