Hi guys,
Lets say there is a commercial property for sale.
The vendor wants to lease it back after its sold, for a price that they pay per month. so its not per week charge, its per month. How much does this matter? negligible? a lot?
And they have pre-set a lease amount with a pre-set 3×3 agreement, cant the buyer change that? We can if we want right?
And um… what are the expenses involved in buying a commercial property? (sorry if i’m being vague.. i’m still learning)
Thanx for the help peeps.
Now is all this just hypothetical or do you have a definite property in mind ?
Chan somewhere recently mentioned a book which costs about $ 30 or so and which goes into a lot of detail about commercial properties. It may not be a bad idea to start off with that book.
Pisces
Hello,
In regards to the lease, it will depend if the conditions are written into the purchase contract. This can not be changed. Otherwise, it will be an agreement between the buyers and the vendors.
David Femia
http://www.femiapropertygroup.com.au>>so its not per week charge, its per month. How much does this matter?<<
Why would it matter to you ?
>>And they have pre-set a lease amount with a pre-set 3×3 agreement, cant the buyer change that? We can if we want right?<<
Anything is negotiable between the two parties. However, if that is what they want, make them happy.
Isn’t your concern the overall picture of the deal i.e. whether it is a good buy ?
It isn’t important what the rent is in that situation
as long as the overall deal stands up and as long as the rent hasn’t been made artifically high so as to possibly mislead you, the buyer, as to the true market value of the property.Pisces
Hi Guys,
Agree with Pisces [:o)]
Cheers,
sisThe book Chan mentioned was “How investing in commercial property really works” by Martin Roth & Chris Lang.
I am yet another newbie making copious notes as the gurus spew forth their pearls of wisdom!! Planning to buy this book tomorrow…
Cheers,
Anthos99
[^]A seller in a commerical sitaution normally wishes to protect something.
Commerical properties are a completly different kettle of fish, for instance, if a commercial seeler has a business that he is selling, there may be a condition that the seller cannot start up a new business within a certain radius, or the same type of business, and this can cover family members too.
There are all sorts of agreements and contracts.
If this seller (and I am no solicitor!) puts in a condition in the contract of sale, this probably will not be negotiable, or why would it be put in in the first place?
QUite often new businesses in new premises can negotiate, for example, a new complex completed, offering places to unique niche businesses, offered shops in an internal arcade $x per msq( i cant do symbols), I negotiated the rent and put in clauses that meant no one coming into or onto the land would be able to sell my products, that included restaurants, take aways or others. I came up against some oppotition when they breached the lease, but I won out. Someone got the heavies to threaten me as well.
Anyway, another lease was negotiated in terms of staggered rent for first 6 months, 1 year with 3 year options and so on. Commerical leases require good solicitors that deal with that kind of thing.
Given in 1994 I was forking out $30k in rent per annum, I was going to protect my interests, you can bet this person will too. Lease backs are all well and good, but is it at market rates? did you check? I figure it is stacked their way noit yours…
do your homework….and if in doubt DONT>
elves
Hmm.. interesting..
and part of the reason why I asked whether it matters if its paid monthly or weekly is… if you get paid monthly… you only get y x 12 = 12y. if you get paid weekly.. you get y/4 x 52 = 13y. A month worth of lease difference.
Anywayz… I’ll do more research on this. thanx peeps.
>>… if you get paid monthly… you only get y x 12 = 12y. if you get paid weekly.. you get y/4 x 52 = 13y. A month worth of lease difference.<<
?????????
Pisces
the difference in a year.
Financially Independent = Gateway to FastTrack
most of the commerical leases i dealt with (and I have had a few) were per calendar month, that equates to 12 payments, I never came across a weekly rent.
So you pay on the 1st of every month
sorry forgot to say;
they are tying you into a long lease
be careful of the wording, for example
1 year, with option to resign at 3+3, so first year if ok then resing at 3 year intervals, you got the foot in the door.bear in mind cpi in any clauses
is the rent fixed over the whole period?
what happens if you want out? consider the long lease you might be caught with, but if a good business, consider you wanting to protect it.you are talking 3×3, do some more research
Penguin, it looks as if you are a magician. You make money disappear.
if the yearly rent is xyz dollars you will receive the same anmount of rent over the year irrespective whether they pay on a weekly, fortnightly, or monthly basis.
BTW, I strongly suggest you get a solicitor to draw up the lease. there are several pitfalls if you don’t know what you are doing.
Pisces
I know what penguin is doing and how he is viewing it, sorta…lol
he is calculating that the months have four weeks and some 5 weeks tecnically giving you a 13 month year, which is why he is alluding to the workings and weeks verses months.
people make a mistake this way. As I said you make a deal per calendar month and you get away with the montsh that have 5 weeks, technically.
I understand that you work it out weekly too.
for example a yearly rent of 30k paid per calendar month is 2500 or 576.92 a week. but if you worked it out, most places do not use it weekly or per month a month being 4 weeks. not calender, am i confusing everyone?
Hm.. all in all I basically understood what everyone was saying, and that there is this convention of charging rents on a monthly basis.
I also understand the importance of analysing the clauses carefully…
but I’m not too sure if I understand the following:
Originally posted by elves:1 year, with option to resign at 3+3, so first year if ok then resing at 3 year intervals, you got the foot in the door.
Are you assuming that I’m the renter? I was* thinking of purchasing a commercial property in which the vendor wants to lease it back on a 3×3 deal.
*Not anymore since the vendor has gone broke and the property is in a foreclosure now and is identified as a ‘high risk’ by the R/E agents.
Financially Independent = Gateway to FastTrack
>>*Not anymore since the vendor has gone broke and the property is in a foreclosure now and is identified as a ‘high risk’ by the R/E agents.<<
That is an opportunity to pick up the property below market price Penguin.
Anyone who buys a property relying on having a tenant has some marbles missing as one’s security doesn’t lie in the tenant so much as in the location.
The moment the property is vacant possession the competition to buy is likely to diminish thus making it easier for you to buy something at a better price.
>>is deemed as a high risk by the R/E agents<<
It is best not to rely too much on what they say. Most are notorious for not knowing what they are talking about. If they were really smart they would be buying instead of trying ro pick up some commission here and there. Most estate agents barely make a living.
Rely on your own research.
Pisces
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