Forum Replies Created
- patriotsoldier wrote:Hey I have searched the forums and am either missing the information or maybe its a little over my head.
Im looking at a Commercial deal(my first) and I think its a good deal, i just want to go into it with full knowledge.
My questions:
Outgoings…. Tenant pays most outgoings on a commercial deal seems to said alot, but can someone define what these actual outgoings are? E.G in residential property in QLD landlord pays water, council rates etc etc. Is this diffferent in Commercial?There are a couple of different types of commercial leases which then affects what outgoings are recoverable from the tenant: Net – all outgoings (but not items of a capital nature) ie insurance, land tax, rates, water usage & service charges, management fees, maintenance etc, semi-gross – certain outgoings are recoverable ie water usage, maintenance of a/c & service charges and some defined outgoings (eg land tax over a base year) and thirdly Gross: only water usage can be recovered (however the tenant is responsible for maintenance of services eg a/c, providing annual certification for fire/electrical etc)
patriotsoldier wrote:Typical LVR on a CP is still around 70%? As this property is in a regional town with a low population(less than 3000) will the banks scrutinize this more heavily and reduce my potential LVR? What is the best LVR available?You may find that LVR is closer to 60% unless securitised against residential property.
patriotsoldier wrote:If a CP is slightly negatively geared, does it still work the same as residential as far as the ATO is concerned?Yes, but it will pay to confirm when the building was constructed (& engage a QS) as different rules have been enacted with regards to depreciation eg accelarated depreciation, increased rate of depreciation and no depreciation on structure before certain dates.
patriotsoldier wrote:finally, a '5x5year' lease, Does this mean that the tenant has a 5 year lease with the option of extending for a further 5 years and that the rent would be locked in for that entire period?5×5 means 2 five year lease terms. The rent will be adjusted according to the method stated in the lease eg: no adjustment for 3 years, annually to CPI, fixed %, combination of any of the above, market rent review, ratchet ie greater of 2 different review mechanisms. The commencement rent (of the first term) and any rent reviews during that term are certain eg $10,000 with 3% annual increases. The exercise of the option (for the second term) is at the discretion of the tenant. There may be a predetermined rent noted in the lease or there may be a fixed increase or a market (agreed) commencement rent for the new term – note that market rent can go down.
patriotsoldier wrote:The deal is located in regional QLD, 2 smallish shopfronts on a block with potential for development, estimated purchase price is set at around $220k and rent is a touch over $310/week. Good scope for capital gain due to growth in the area and increases in rent in the short term. Would people consider this a good deal? or are there better deals in commercial available?These shops will come under the Retail Leases Act Qld. So do some reading up on the RLA (Qld), there has been some recent caselaw regarding ratchet clauses, so check out the websites of some of the larger legal practices which specialise in retail lease law.
patriotsoldier wrote:The figures i am running is a 30% deposit of $66k
rental ROI at asking price is 7.33%
Older shops with very low depreciation(if any).
Stamp Duty $6,500
Am I missing anything?Thanks in advance,
Mick
Before jumping in with both feet, get a solicitor who specialises in retail property to review the lease and bring you up to speed about the ins and outs of the lease – it is a specialist area and your run of the mill family solicitor won't be of much use (not that they couldn't do it but probably see fewer leases of this nature than a specialist).
You will need to satisfy yourself about how long it will take to find a replacement tenant if they vacate, other uses (if there are restrictions on use).
Heath, you are heading in the right direction. Your brief to the architect should take in your desire to build in 2 stages maintaining the current house.
Is the intention to strata and sell all/some of the units off or are you going to hold on to them all?
Is your father going to be contributing to the construction costs/finance costs on a 50/50 Share basis or other basis – you will need to have a look at some documented partnership arrangement with your father.
It would be prudent to float the concept past a real estate agent or two to ensure that there is demand (not just because they have nothing on thier books & want sales). Check what is in more demand ie 1,2 or 3 bedders and any specific requirements like a/c vs fans.
Speak to a quantity surveyor (or check out their websites for a cost guide), remember to add the appropriate loadings for the remoteness of the region as well as cyclonic conditions. Costs will vary wildly depending upon what has been included eg only the building cost (and to the stage of completion eg lock-up or fix-out), whether it includes all paths, driveways, landscaping, fencing etc, connection to drainage, design costs, DA/CC fees and the other myriad of costs. (A copy of Rawlinsons Construction Cost Guide wouldn't go astray).
1 – as it is your sister, I'd be inclined to self-manage, mainly for the reasons you have already outlined.
2 – get a lease in place, this protects you and your sister and your relationship.
3 – regardless of the 3rd person, you are not just a landlord, you can visit your sister at any time (if that is the sort of relationship you have with her).Are bank bills still an option? Do you have the $ for the 40% deposit on a commercila loan?
Mine are getting insulation. That'll keep them happy,
In the first instance, speak to the licensor (it they aren't already the person that you deal with). Tell them it is unacceptable that you should bear the cost of their blunder/incompetence etc & see what they come back with.
I really love it when the tenant redecorates to their taste. Pity is there will be no requirement for the tenant to reinstate the property to its previous condition ie painting over that red gloss wall or the like.
As for other changes, the LL will pay the whole of the lease prep cost (ie another $15 out of your pocket, on top of the GST component that the tenant doesn't pay at the moment).
There are 2 sides to every story with tenants being required only to pay 6 weeks break costs, who pays the reletting, who suffers the loss when it doesn't get leased out in a flat market or if rents have dropped? Sure there are some circumstances where a tenant should be able to move out eg AVO etc but a blanket over all tenants is just pandering to the lowest common denominator.
Simple question Ilonka. If you can't afford a mortgage of say $200,000 to one bank, how does having 2 mortgages of $100,000 each change the situtation other than putting the risk of losing the investment onto your investment partner/second mortgagee?
The appearance of the building is a good indicator, a well kept building would tend to indicate that the owners do look after the place (or it was excetptionally well built). A healthy sinking fund & admin fund tend to show good income & expenditure with no delinquent debts, no outstanding special levies or unpalatable levies in the minutes of the AGM (although there may be costs for major compliance upgrades they may be planned and funds being put aside).
Find out how many owners actually occupy the building (the more the better as you don't want to be in a building full of transients/renters etc).
How old is too old? Depends on how deep your pockets are, how well maintained you expect the building to be etc. You do pay more in the way of levies to maintain an older building but they do have character.
Push your solicitor to insist on VP & don't settle until vp is provided.
Brick? Asbestos/Fibro? Timber? Brick Veneer? Size/area m2? Requirements to separate different types of material? Ease of Access
Give a couple of demolishers a call once you know the above, they should be able to bounce a number back to you almost instantly.
Are there any outstanding issues with the dept of fair trading – check their website or give them a call. If there are no issues reported to DFT then the issues cannot have been major.
To clarify Richard's point, the mortgagee engages a valuer to determine how much they should lend against the security (your IP) in case of default and based on the banks experience it will issue instructions to its valuer accordingly. There is no contract or other relationship between you and the bank's valuer and the valuer has been engaged to protect the interests of the bank, not you.
Handyman doesn't need to be licenced if it total cost is below $1k (or some small number).
You've got over $100k of equity, say $80k if you are avoiding LMI. New loan of $340k shouldn't be too big an ask if the financier is aware of the rental scenario.
You will find that there is an obligation on the owner to keep the property to a particular standard (same as all of the other rooms), this may be managed by the resort manager or they may require you to do it (generally done by resort though). You will find that you are sticking your hand in your pocket quite often eg cleaning, linen supply, change lights, common area cleans, rates, power, furniture/glass breakages, property maintenance…………….
Generally you will find that resort management will have the sole letting & management rights ie you cannot independently lease the unit.
There are 2 types of return – pooled, whereby you have a set % of the income & expenses or income and expenditure is based upon your unit solely (then you will need to ensure that there is an equitable distribution of bookings).
Change the locks, tonight!!!1
You'd want to have a deed in place to retain ownership (of your contribution) diminishing over the term of the lease hence decreasing the risk of the tenant removing 'your' fixtures.
What is the incentive for an agent to achieve $20k above asking if they are not getting a % reflective of the additional work required achieve that higher price? Basically, all a fixed-fee agent will do is achieve the minimum price set by the owner, nothing more.
