Hi all,
I need a bit of general help/advice.Has anyone on this forum got any advice on investing in commercial property in country/rural Victoria. Have you done it? If so, has it been a success or failure?
I have a couple if IPs in suburban Melb. But have NO experience in country props. I am currently in the process of doing severe due diligence. Any thoughts?
Thanks in advance.
Hutch,
If the property is already tenanted, consider the length of the tenancy and the tenant’s payment history and as far as you are able the tenant’s ability to pay the rent in the future. If the tenant is a company have the directors personally guaranteed the lease.
If the tenant vacates, will the property release easily eg is it in a good position, are there alternate uses, are the premises nearby full or vacant, is the current rent in line with the market.
Hutch
I am no expert but have recently purchased a commercial property in a NSW town with a population of around 5000. Its a petrol station. There is one other petrol station in town, not so well located.
Price was $350,000, rent is $30,000 pa. We pay rates and land tax. Tenant has been there for 15 years and has a long lease. Its a little shabby but not too bad.
Finance is more expensive than residential and we needed 50% equity. Luckily I went in with my father who paid cash for his half, otherwise it would not have been possible.
So far, no regrets but I look at this as a long term, slow gainer. I don’t expect any fast profits.
I hope this one comparable (sort of) sale helps.
Matt from Sydney.
P.S. I would be interested to hear if anybody else has a petrol station?
Commercial property in smaller regional towns can be extremely lucrative. The yields tend to be better than in the major cities so positive cash flow is more easily achievable however, capital gains may not be as good.
Location is still important and high street or highway locations will generally perform better than the properties one block back.
Also of great importance is how you value the property. I tend to look for under rented properties and then base my purchase price on actual rents rather than potential rents. You will need to make rental comparisons (rate per square metre) in order to get a feel for the market rates.
You will also find that National and even International tenants still occupy commercial buildings outside of major cities eg oil companies, agricultural companies, super markets etc.
P.S. I would be interested to hear if anybody else has a petrol station?Yes Matt, I own a number of service stations in different locations around NZ. I have just sold one for $560k in a town of 4000 people – rent $55k plus outgoings. I considered it, over rented.
I tend to favour service stations, probably because of my earlier career path. I’m happy to exchange notes.
Cheers
Jeff
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