Forum Replies Created
Hi James,
I did a lot of research into this, and very long story short concluded that providing an internet service was not going to make me any money, and beyond that the quality of service to tenants was not going to be good enough to be worthwhile.
The costs are high;
-CAT6 cabling
-network hardware (access point/s, router, modem)
-electricity monthly connection fee
-electricity usage charges
-ADSL setup fee, phone line activation
-ADSL monthly service charges
-phone line rental (if non naked ADSL)
-payment gateway fees
-operation and maintenance fees (Modem restart, hotspot restart, create user, delete user, BYOD connection issues, etc, etc, etc)
I was going to use an established hotspot provider in order to manage user payments, misuse, and maintenance issues….for a fee of course.In summary;
Setup costs amounted to $3,049.00.
Monthly Expenses amounted to $177.14.
Revenue assumed every tenant paid $45 per month for a 1/6 slice of an Australian ADSL service. Not good value.At the end of the day;
– the model wasn’t profitable.
– the model didn’t scale well enough (more users increases the cost of internet services)
– it was going to take 38 months to pay off the setup cost.
– I don’t want the tenant associating the quality of the internet service with their need to pay rent.OK thanks guys. I’ll give this a wide berth for the time being.
OK, thanks Andrew. Good point RE inclusion of services (electricity/internet) actually reduces the tenant’s commitment to the property and thereby makes it easier for the tenant to leave.
Hmmm. That’s two out of two responses AGAINST providing internet access. Interesting, and not what I was expecting…
OK, thanks for your response Jeff.
Yeah, getting finance has been sooo unbelievably difficult and convoluted. I wont name the bank, but it's a bank in the west.
After running the serviceability calulator umpteen times since initial application in July/Aug, they finally agreed that my wife and I could service the loan.
What that sorted, the application proceeded to the lending department, who imediately came back and said, 'er, actually, we cant accept any of this unless it is within a discretionary trust with a company as trustee.
With such a gruelling lead up to this in proving serviceability, we were flabbergasted. .
This was the only lender that would accept the investment and my security so (for the purpose of this deal) we have setup a discretionary trust with a company as trustee.
Fingers crossed, we'll achieve settlement in 6 weeks from now.
Thanks Terry, appreciate the rapid response.
Would you expect the bank to do anything differently in assessing the viability of my loan going forward. Are they going to want to see Company Profit & Loss each year, for example? To assess the ability for the company to service loan?
(Or is it like an investment loan for a residential rental property- where they only care once you start defaulting on payments)
I'm buying a property that requires a commercial loan (6 units on 1 title). Getting finance has been like drawing teeth- it has literally been a 5 month process.
With settlement due at the end of this week, the lender has just told me that they now also require the loan to be within a discretionary trust with a company as trustee.
I'm trying to determine if this is a deal breaker for a couple of mum/dad investors with one other IP.
TerryW's 4th point in last post (above);
4. Consider using a discretionary trust with a company as trustee. This will limit the liability if the trust is sued and also offers the greatest flexibility with minimsing taxMy questions are;
1. Is this as flexible as buying within a discretionary trust with me and my wfie as trustees?
2. Will this structure be like buying within a company (ie. taxed at a flat rate of 30%, and no 50% CGT discount).Any advice here would be welcomed.
Thanks Richard and Michael for your valuable responses.
Michael: the other lender I found that was willing to do 80% residential loan, pulled out because the units didnt have individual laundries. I havent heard of that one before….
Hi Scott No Mates,
Can you PM me RE properties returning good yields too.
Cheers, TobyJust so that I'm clear here;
1. Vendor Financing is not something that you can get unless the vendor is offering it, right? If you want VF, then at best you can ask for it, but it's the vendor's call at the end of the day whether they want to give it to you.
2. Which means VF is something that can only be used as a buyer in some (presumably small) subset of properties for sale- ie. the ones that you can agree VF with vendor.
I want to clarify this, because I seem to read more and more people talk about VF as though it's a sure alternative to a bank loan.
I would have thought it'd involve;
1. (likely) educating the vendor about what VF is.
2. asking the vendor whether VF is acceptable.
3. agreeing the terms of the VF
4. getting a lawyer to advise/shape/formalise the agreement.
5. etc, etc.…before you'd know that it was an alternative to a bank loan.
The main point I'm taking from this and other threads, is that cross colateralisation can put your PPOR at risk, if you have X-colat'd with IPs (because the IPs could turn sour). Lesson: dont mix PPOR and IP loans together.
Are there any terrible problems associated with cross-colateralising strictly IPs only? I like to have cash on hand (insurance, in case I loose my job)- and x-colat (for IPs only) is attractive from that point of view.
The property is in Adelaide.
You did well to answer my last reply- I accidentally sent it off incomplete…sorry
I was going to say;
To clarify, the 'Existing Use Rights' are at risk of expiring if;
1. the property has been left unused for 3 years.
2. you change the way the property is being used. eg. Change its use from manufacturing site, to a warehouse, or more significantly, mixed use (if living upstairs and renting downstairs).You've answered these points above (thanks), although the way I'm reading your notes, it seems the mixed-use ideal wont necessarily void the 'existing use Rights'. Something for me to look into.
To clarify, the 'Existing Use Rights' expire after
The upstairs section is the only part that could be used to live in. Downstairs is 900sqm of open space. Good point RE separating the domicile entry point. That's do-able.
Can you suggest ways to best assess the demand for warehousing space? Obvioulsy, speak to agents, look at current for-lease advertisements, any other ways?
Thanks Scott, the current tenant vacated about 2 months ago. I'll keep the 3 year expiry in mind, and the point about considering the long term best use of this property. Redevelopment / Sub division would probably be inevitable down the track- that's something I need to understand more.
Do you think that I may be able to get a higher LVR from banks because of the residential zoning?
This property attracts me also because there's an opportunity to live upstairs.
Living there might introduce more complication, but in all, I thought it might be a good entry-level commercial real estate investment. Thoughts?
