Hi everyone,
Today was my first venture out into the real world of investment properties after spending months studying the subject. I was initially looking at residential but may have found a commercial opportunity. I’d appreciate feedback on whether others think this is a good deal or not. Here’s the scenario:
Industrial lot – asking price $150,000. It is split into two parts. The front part is tenanted by a small radiator service business who have been there since the beginning of the year. (I had a chat to the tenant and business is going well at this stage.) It is on a 2 year lease with a further two year option. They are current paying $10,000 pa. The current owner (who wants to retire and just dabble in his own things) wants to lease back the other part for $5,000 pa on a 3 year lease. (That gives a total 10% gross return.) As far as I can tell, my total costs for the purchase will be:
Stamp Duty – $4905
Conveyancing – $490 (quoted by a settlement agent)
Other costs – $200 (also settlement agent)
Solicitor – approx $300 (for reviewing contracts, etc)
All outogings, rates, etc to be paid by the tenants.
Have I missed anything?A finance broker I have talked to can probably get me a variable rate under 7% on 75% of the value. That means I have to come up with the other 25%. (I don’t have the cash at the moment but am working on options. If anyone can help, let me know.)
So I’m kind of jumping in the deep end here but to me (so far) it seems like a good deal. If anyone can see any flaws in it, pleeeeez let me know.
It was very exhilarating. Even if nothing comes of it, it’s been a great first experience.[
][]As an addendum, I’ve already polled the vendor to see if he is interested in negotiating price or terms. I offered a 3 year interest only loan on the 25% needed for the deposit but he wasn’t interested. (He’s an old guy and just wants to retire and not bother with deals.)
Also, if I can’t raise the 25%, I’d be willing to pass it along for a mutually acceptable finder’s fee. (What’s the going rate?)
As an addendum, I’ve already polled the vendor to see if he is interested in negotiating price or terms. I offered a 3 year interest only loan on the 25% needed for the deposit but he wasn’t interested. (He’s an old guy and just wants to retire and not bother with deals.)Also, if I can’t raise the 25%, I’d be willing to pass it along for a mutually acceptable finder’s fee. (What’s the going rate?)
There will no doubt be some other fixed costs, such as loan fees and some crazy stuff the government or lending institution will come up with. By the way have you had a building and pest inspection done? Essential before signing buying anything.
BenThanks Ben,
Actually, I’ve done some more research and found a few little things that make it less attractive, such as the own has been paying all the outgoings. So I’m not pursuing this one.
David
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