Hi
with commercial property, who pays for what when it comes to expenses etc ? ie electricity, gas, body corporate (or equivalent), water etc.
if i can give an example i have found a commercial property in tassy, that has a return of about 11% nothing special compared to some on here, but i have just started looking. but i am just trying to work out if the expenses are going to make it not worth while.
lets say, just to make it easy. the property is for sale at $100,000 and i will be getting $11,000 return a year in rent
cheers and thanks for the help in advance.
by the way thanks for everyone who has posted responses here it has helped me greatly and i hope i can share my knowledge in the future.
pmaurice, the good thing about commercial properties is that the tenant pays the outgoings (if that’s how the lease is set up). So there’s mimimal cost to you in ‘holding’ the property.
The bad thing about commercial is that banks don’t lend as high an LVR, and also the interest rates are higher than residential.
Hopefully somebody with commercial holdings can give you a more specific answer.
Cheers
Melthanks for that mel, thats great.
but like mel said if anyone else with commercial holdings can give me more specific info that would be great.
cheers, thanks again mel
PM Maurice, what melbear said was pretty well spot-on. Important to check out the lease document, title, and due diligence on the building and area. The reason banks have a higher LVR is because they perceive risk to be higher. It is therefore very important that you get a location that is going to be easy to relet when/if the current tenant leaves. It is also important to check that the current tenant is not paying a rent that is in excess of the market rates, otherwise the rent and value of your building could reduce on review or renewal. Industrial buildings are generally easier than retail or office Hopefully the lease will have a ratchet clause that procludes the rent from reducing. Hopefully, also, the lease is for a long term and has the tenant paying ALL the outgoings including gas, power, rates, insurance, insurance valuations, repairs and maintenance, body corp levies etc. If all of the above is fine and due diligence checks out then it sounds like a good deal. I might be interested in buying it if you decide to pull out – you could e-mail me on [email protected]. I could handle a little business excursion to Tassie every so often, and would pay you a modest finders fee if I proceeded. Best of luck if you decide to go ahead, and don’t forget to do your due diligence on the tenant. The best lease in the world won’t do you much good if the tenant is flat broke with no assets. One of my tenants recently bought himself a new Monaro and I can’t tell you how assuring that felt. Good to see there are others out there that see the merits of commercial property. Personally I love it and wouldn’t go back to residential for all the tea in China – see Appendix C in Steve’s book as to why!
Julian.Thanks for that julian
i will let you know if i do not go ahead with it.
cheers and all the best
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