5+5+5 leases?

Hi Wayne

5+5+5 lease means an initial term of 5 years with 2 further rights of renewal for 5 years at the tenants discretion.

Cheers
Jeff

AC, I was on same track as you, except I dont even see these with commercial (5+5+5) unless over $1m.

Hi Wayne,
The right of renewal option allows the tenant to renew under the same terms and conditions as that set out in the original lease provided they have complied with those terms ie paid the rent, looked after the property etc etc.

The lease normally has a rent review clause in it which will determine how the rent is reviewed eg in line with CPI of registered valuation
This clause will also refer to specific dates and not necessarily on review date.

In many cases the lease maybe renegotiated for various reasons. The tenant may require some upgrades or extensions or want to do something else to the property which is not covered in the original lease. If this happens you can renegotiate relevant clauses or if both parties agree – start again.

Check the lease for any “holding over” clause or similar. This basically means that if the tenant does not formally renew for the next term within the specified time frame, then they go on a month to month lease under the same terms and conditions. This is not always a bad thing for the landlord, I once had a struggling restaurant as a tenant who could not renew so we left him on a month to month to allow him time to sell – which he did. Everyone won.

Cheers
Jeff

As a point of interest, I have seen a few of these style leases up in North West WA. These are usually defence / government tenants and have seen predominantly residential properties.

Has anyone got any experience with the Karratha area as the props I have seen have on face value been +ve geared with long leases, ie 3+3+3?

Hi all,
I may be taking a liberty here, but KP (forumite) currently lives in Karratha. Perhaps you might want to PM him directly and he’ll be able to give you some more info. I live in the north of WA myself and we have very similar conditions here. Both Towns are mining Towns and that would be the reason for the predominant +ve cashflow properties. High purchase price & high rental yield with wildly fluctuating CG/CL.

Cheers

C@34

Jhopper,
in a word “BULL”, I have had a loan with one of the four big Banks pre-approved to a LVR of 95%. You are limited, though, the the four Big Banks and Bank West is also in town.
I don’t know about regional/rural areas, but the CG/CL (capital Loss) of this kind is typical in Hedland! In a down cycle people can’t sell brick houses for $120K (reasonable condition) but in an up cycle they’ll sell for twice that. It all depends on the local Mining industry and whether there are any new developments comming.

Cheers

C@34

HI all,
Thanks C34 for dobbing me in…and yes I am in Karratha…

There seem to be some GEHA (Govt Employees Housing Association) and Defence Housing leases around that offer longer term +++ leases.

From what I have seen, they are not really +geared, and the asking prices tend to reflect the rents received (ie…high rent = high asking price, not necessarily reflecting the market value) They are a very passive investment and may suit some investors, but not my cup of tea.

But on the positive side, you can pretty much be guaranteed of receiving the rent for the term of the lease (no vacancies) and in the case of DHA I understand they do the maintenance at their expense and replace carpets and repaint at the expiry of the lease….but their management rates are usually pretty steep.

Like I said, not my cup of tea, so am not a full bottle on all the terms and conditions involved.

I feel asking prices are too steep and hard to justify ($300k to $400k for a new 4 bed 2 bath home) and to this end am trying to organise some investors and a developer/builder from “elsewhere” (Perth) to do project building in town with a view to getting prices down to more realistic levels, and as rents are still very steep and staying high, you would end up with a true +ve property, at a marketable price with the potential to reap some gain should you decide to sell.
Thats the plan anyway…

If anyone needs more info, or wants feedback on a particular property, I am happy to volunteer an opinion..

Cheers
KP

Sorry KP, I should have asked you first!

No not realy, the banks here are well versed with what is available and where it is. The clauses they put in is subject to the banks satisfaction of the property (and location), so they basically look at what you could afford (max) and you just nominate an amount below that. I picked a house for $63K at first (thank goodnes that fell thru) and the second house was more like $192K. But it would pay to approach the local branches as the interstate branches often haven’t a clue what goes on over here. Even from Perth, they don’t quite understand what happens up here!

Cheers
C@34

Cheers

C@34