All Topics / General Property / Commercial Property Questions

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of nmcacenmcace
    Participant
    @nmcace
    Join Date: 2003
    Post Count: 16
    October 25, 2003 - 8:06 am

    Hi

    I’m thinking of investing in a commercial property, and I was wondering if anyone could fill me in on the important points to watch for with regard to how commercial differs from residential – eg GST considerations.

    The place I’m looking at has alright looking figures – 2 side-by-side shop fronts, selling for about $200K, and one of the 2 shops currently rented out for about $17000 pa, and the rates are $6000 pa.

    Any feedback on commercial property pitfalls or these numbers in general would be much appreciated.

    Cheers

    Profile photo of craigccraigc
    Participant
    @craigc
    Join Date: 2003
    Post Count: 29
    October 25, 2003 - 8:40 am

    Hi nmcace
    One of the main problems is that most banks will only lend on commertial properties over 10 years.
    I have one that at the moment is O.K, But due to some changes it may fall into the -cashflow next year. ( but thats another story ). Have you checked with your bank on the term of the loan. You stated that “one of the shops is rented “
    Why only the one & how long has the other been vacant, Why did the other tennet move out.
    Just some thoughts
    Regards
    Craigc

    Profile photo of nmcacenmcace
    Participant
    @nmcace
    Join Date: 2003
    Post Count: 16
    October 25, 2003 - 8:58 am

    Hi Craigc,

    Thanks for the feedback.

    At the moment, the finance shouldn’t be a problem because I’m just using an existing mortgage on my home.

    I think the other shop’s been vacant for about 6 months. The agent was saying the owner hasn’t really been too fussed about finding anyone else, and he reckons he could find a decent tenant within 6 months

    Profile photo of AdministratorAdministrator
    Keymaster
    @piadmin
    Join Date: 2013
    Post Count: 3,225
    October 26, 2003 - 4:27 am

    >>and he reckons he could find a decent tenant within 6 months<<

    Wow, that sounds like a really good location.

    Pisces133

    Profile photo of BillfromozBillfromoz
    Participant
    @billfromoz
    Join Date: 2003
    Post Count: 381
    October 26, 2003 - 4:50 am

    G’day Craig…

    Sounds like you better put the commercial idea on the backburner mate. As with most if not all R/E you will buy cheaper down the track

    As for that Propert/Agent…. give that property deal with a 50% vacancy factor a big miss.

    Cheers

    Bill

    Bill O’Mara
    Real Estate,Mortgages,Share Market Strategies.
    [email protected]

    Profile photo of craigccraigc
    Participant
    @craigc
    Join Date: 2003
    Post Count: 29
    October 26, 2003 - 7:00 am

    Hey Bill
    Im with you I think that nmace would be wise to give the commerial property he is looking at a very wide birth. PeterM is right “6 months to find a tenant” is the R/E for real. I’m not sure what you ment by “put the commertial idea on the backburner” let me know.
    craigc

    Profile photo of AdministratorAdministrator
    Keymaster
    @piadmin
    Join Date: 2013
    Post Count: 3,225
    October 26, 2003 - 9:22 am

    Nmcace, I happen to have had a bit of experience
    in buying and developing commercial property in country towns.

    The reason for my earlier response was in essence a knee jerk reaction as the agent’s advice means that more likely than not there is something drastically wrong and therefore the danger for buying a white elephant is great.

    However ………………, looking at the details again it may nevertheless well be a deal.

    If the present rent is the correct kind of rent then, upon getting the second shop rented, the nett return isn’t all that bad really.

    It is extremely difficult (if not impossible)
    to make a judgement without knowing more details.

    For example, things like

    1. what is the population ?

    2. are these shops well located ?

    3. are there many vacant shops in the shopping centre ?

    4. what kind of tenant is the second tenant and what kind of lease are they on ? (something that I normally wouldn’t care about as long as the location is excellent)

    I would think it rather difficult to make a judgement long distance and would much prefer to ‘get a feel’ by walking through the town.

    Why not email me and I will be happy to go into a bit more detail ? [email protected]

    Cheers,

    Pisces133

    Profile photo of nmcacenmcace
    Participant
    @nmcace
    Join Date: 2003
    Post Count: 16
    October 26, 2003 - 10:12 am

    Thanks all for your responses. Keep ’em coming :)

    As far as the stats of the town/location, the population’s about 20,000, the place I’m looking at is on the main street of the town. There are a couple of vacant store fronts, but not too many. As far as the agent’s comments go, I got the impression he was just being conservative in his estimates.

    Like Peter said, the figures even on 50% occupancy aren’t too bad. I did go over to the town and it looks like a really nice storefront, and well kept, solid interior.

    The guy selling the property is actually the current tennant, who’d be leasing one half of the property back with a view to reviewing the lease each year. Since he’s the one setting the first year’s rent, I figure that’d be a relatively low rate he’d be giving himself as well.

    I’d also definitely be interested if anyone can give me any idea of what considerations should be made with regard to owning commercial properties. Eg GST, is insurance for a commercial property a lot higher than for residential, etc.

    Thanks again for all your feedback

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