Hi all,
I have found (based on Jaffasoft’s lap pack) a commercial property oppotunity that could deliver a 28% return.
Key financials are as follows:
Total annual rent = $60866.00
Total annual mortgage = $23285.25
Total annual costs = $20603.92
Total annual cashflow = $16976.83
Total funded costs = $60675.00
Annual Cash On Cash Return = 27.98 Percent
Cashflow Positive Weekly = $326.48It is a multi-tenated property and 3 of the 5 components of the property are not leased *1st red light just went off*. In the calculation, I assuemd yes, i would get tenants but included 4 weeks of the year as no cashflow.
My question is, I really have no idea of what to consider in costs for the following items. I have just listed some estimates that were usesd to calculate the 28% outcome above. I really put some meat on the figures and over estimated to see what the outcome would be. It’d be great if someone with commercial property experience could run over the figures and provide some feedback.
Deposit 10 Percent = $39500.00
Legal fees = $2000
Stamp duty = $12300.00 (Qld)
Mortgage insurance = $5000
Inspection costs = $1000
Rates = $5000
Insurance = $8000
Management fees 7 Percent = $4260.62Even if I am right with the above, I probably can’t afford it. If someone is interested in finding out more, happy to pass on details as well.
Commercial property is very different to residential. Your 4 weeks vacant per year asumption is applicable to residential but not commercial property. If you get a good tennant they can be very long term, but it is also possible to have long term vacancies.
Good luck, but make sure you know what you are doing before entering this market.
I doubt you’ll buy the property with only a 10% deposit unless you can do some creative financing eg vendor finance, equity partner, cross collateralisation etc.
Recalculate your figures. If the deal is any good try putting in an offer with a longer due diligence clause then try flipping it. Alternatively your contract could be subject to putting tenancies in place. If that happens before you settle you won’t have any loss of cashflow
Cheers
JeffWhy have you got over $ 20 K worth of prop. costs ?? Is the current Lessor paying for these ??
It seems by the figures the rent is grossly inflated to cover some of these costs. I’d be surprised if the units are being rented at the current market level. 28% is too high !! Would you sell at these yields – no one would.Keep checking for something awry – Due Diligence is a bugger to perform, but worth every minute.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
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