I have been looking at commercial property as an investment to diversify from residential. What I cannot get my head around is why one would buy a commercial property yielding 8-9%(seems to be norm) and take on all risk factors rather than investing within a syndicate with lower risk and same return. Am I missing something???? [blink]
Why is a syndicate lower risk?
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
The ones I’ve looked at are big syndicates with multiple national tenants. Less risk of vacancy and funds are spread.
Have a look at the fee structures, often the manager of a syndicate receives a large % of any capital growth, so the income might be equivalent, but not the pay back at the end.
Are they the same as LPTs that invest in CPs? Guys at work structure that kind of stuff, some listed, some not and then offload them to retail. I recall from reading one of the prospectuses that they do rip a fair amount of fees out. They try to sell it as a pure income play – some with very little particpation of capital growth. All depends on how its structured and/or leveraged. We have some great minds structuring these kind of deals and their services don’t come cheaply. And I believe there are also many other hands in that pie too. I think the idea behind direct CP ownership is to buy something well, maybe change its use, increase rent/tenants and thus capital value. Easier said than done but some individuals in this forum has obviously done very very well from it. I’m still learning…..
hi all
Syndication has nothing to do with risk.
The risk is similar just spread across more members.
The value of the item to be purchased is the main reason for syndication the cash/equity is spread across a larger number of investors.
There are many types of syndicates and no not all syndicates rip large management fees depending on what the syndicate reason is.
There are.
Buy build sell
Buy build keep
Buy completed product and lease.
All have different structures and can be as small as 3 groups and as big as a listed property trust.
and yes there are alot of companies involved in this market and the market is huge.
As you may or maynot beware I cannot recommend any syndicates, it is contrary to the asic 2,20
rule.
which means you are not allowed to recommend anything more then 2 mil in value or to more then 20 people either or.
As you will see from this forums number.
The 20 number would be slightly over.
As for the 8 %return there is a couple of syndicates not ours that is quoting in excess of 11% for a commercial building syndiacation most are unit trust and you can find them, you just have to keep looking.
The best are small fixed number, fixed return dividend, specific project,and specific time and projected profit.here to help
A site that’s worth looking at re small commercial syndicates is Gardner and Lang (www.gal.com.au). They put together syndicates and offer quite a lot of free info on the subject.
Am I missing something???? [blink]Yep – it’s called 100% control of your investment and being master of your own destiny.
It’s a bit tough trying to get you voice heard when you are a small fish in a really big pond. Do fish have voices ??[biggrin]
Also, if you have the scale (size – not the fish type) yourself, you can attract quite decent tenants.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Dazzling is right
Considering the size of your purchase, you want to make sure your in control of your asset, the more people with a say, the more problems may arise when it comes to descision time. Just like the saying goes “To many chiefs, not enough indians”
At the end of the day, “Risk equals return” and no matter how much return you want, it will always be governed by how much risk your willing to take. 10% on your money is 10% on your money, no matter how much you put in![cap]
Higly Motivated Investor
Of course another angle is to say that the syndicate can buy $15million buildings with multi national tenants, but if you have tenants paying $1,500,000 P.a to lease a premises.
Either alot of individual shops or alot of warehouse space, and they leave, it may be difficult to lease to another mult national tenant with the resourses to fund such figures.
which is really the reason of your investment in the first place. There is obviously a higher percentage of businesses leasing premises with turnover of $1million pa than businesses turning over $10million pa therefore there is going to be a larger pool of potential leasees for you investment.
Higly Motivated Investor
Thanks for all the good feedback… all good!!!
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