Hi All..
Hope everyone’s recovering from the New Year.
Just browsing through some agent’s sites and saw a commercial property listed that made me think of the Pro’s and Con’s of commercial property.
Now, i’ve never invested in Commercial Property so have no experience, the fact that the tenant pay’s all outgoing’s appeals to me, and i’ve seen some commercial property over time listed at up to 13% return (gross), the availbility of tenant’s however worries me, as i’d hate to have a property sitting there for years, so this property interested me..
Can anyone give me any input/ideas/advice
Advertisement states
$184 000
7.%% Exclusive ***** (Suburb)
Fabulous commercial starter, this neat suburban office features a private toilet and kitchen facility, 2 balconies and 2 undercover parking bays, fully occupied with such quality residents as **** MLA and *** Architects [
] The complex boasts an impressive corporate boardroom and convenient secreterial services on site. This light and bright office is leased to Jan 05 at agross rental of $16’680 to show a 7.5%PA net return (0 rated for GST)
Shire- $800PA
Water- $610PA
Strata-$326P/Qtr
It’s located on a Busy area and reasonably close to the CBD alsoThis one again made me interested
Any Help/ideas ?? [
]REDWING
Commercial newbieMight have to contact some “Commercial Real Estate” companies locally and see what they have tooffer and look at the returns..
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Redwing, there is only 12 months to run on the lease – which means you could soon be looking for new tenants soon. Will it re-lease easily at the same or a better rate if your tenant does not renew? How does the value compare with other similar offices? Does it need refurbishment? New office tenants sometimes ask for you to refurbish the property for them to sign the lease. Suggest you talk to agents in the area, check the lease, talk to the tenants (if poss), check the title, find out about finance, do your sums and only if it all adds up, get a valuation, then proceed cautiously if it still looks good. Remember, commercial finance not only requires a larger deposit (unless you have additional security) but also attracts higher interest rates from lenders. That said, the yeilds are usually far in excess of residential, and the headaches usually far fewer. Personally I wouldn’t even consider something with such a low yeild (7.5%) unless there was significant upside ie the rent was substantially less than it should be and there was high demand, or if there were development or other opportunities.
Good luck, JulianHi redwing,
It looks like a strata titled office to me.
If you do the calculations, you’ll realise that YOU are the one paying the rates and taxes, not the tenant. This is typical of these types of property, although what you said about the tenant paying rates and taxes is true for the majority of commercial properties.
I’d check to see if those “blue chip” tenants that they advertised are actually the ones renting the office that’s for sale. Sounds more like an “attractant” – they might just be renting other offices in the building.
In my opinion, these types of properties give you the worst of both worlds. They usually rent out on the same basis as residential properties (ie 6-12 months), which doesn’t give you the same security as a decent commercial property (where the lease usually runs from at least 3-5 years). The floor area is usually much smaller than a residential property you could buy for the same price. And it’s much harder to sell, because it only appeals to a very narrow spectrum of investors, which may equate to lousy capital growth.
Of course, my views are based on my own experiences. I’d love to hear some positive experiences.
Cheers
Elysium-MThanks for those post’s
Food for thought !
I’ve found some better commercial properties since that post, returning a lot better than 7.5%, most seem to be returning 9% with the odd few in 10%-13%.
Like i said, haven’t invested in Commercial property before, so just ‘searching’ at the moment and trying to learn a bit more about the ins and out’s of such..
Have my handy COCR calculator to look at these deals a bit better too.[^]
At the moment don’t have the free time to go visiting some of the rural areas, the net’s ok, the papers better, but actually ‘getting out there’ is the best i believe, so looking at other options…..
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Guys, when talking about commercial properties please detail what kind as then at least everyone is on the same wavelength when we are talking.
Commercial can mean anything e.g. shops, offices, specialised retail like a service station, a freestanding isolated shop or premises, etc, etc.
They all have different returns and carry different risks.
The location too can make all the difference in the world so a more detailed description will enable everyone to immediately get a similar picture in their mind.
BTW, I absolutely love shops, especially in country towns. Lots of opportunities there, especially recycling existing buildings.
Thanks,
Pisces133
] The complex boasts an impressive corporate boardroom and convenient secreterial services on site. This light and bright office is leased to Jan 05 at agross rental of $16’680 to show a 7.5%PA net return (0 rated for GST)
]
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