i am confused…

26,

Outgoings are rates, insurance, water, body corporate ie. all the thing u normally pay with residental.

u need to check out the lease to make sure they are paid by the tennat.

As the prop is a going concern (has a tennant), my understanding is that GST is not applicable for the purchase. If u are registerd for GST ( u must register if income is above $55K I think) then u charge the tennant GST the u do the quarterly BAS return and pay the $ to the ATO.

There are probably are issues that u should discuss with your accountant. Get their advice before acting.

Other issues:
The return appear very good.

How secure is the tennant? Is his business successful?

The Increase PA of 5% appears gennerous.

Good luck.

hrm

G’day JC,

It appears the nett yield is 9.34% which is pretty good. Not mind blowing…but better than 2%…if you know what I mean. [wink]

Can I ask if the property is sitting on it’s own dirt ?? If so what is the dirt worth.

If no dirt, you are buying the lease…which is OK as long as the Lessee is strong.

Best thing you can do is get the Lease and have a jolly good read over a nice cup of tea.

For a comm. prop, this is pretty cheap stuff, so the first clause I’d be checking for is a “First Right of Refusal”. Sometimes these are in Leases, whereby the Lessee (tenant) must be given the right to purchase the property after you have done all of the hard graft in negotiating and signed a contract to buy that has been accepted by the Vendor. If they decide to take the option up…bye bye to the deal…they get it at the price you negotiated with the Vendor. You walk away with nothing.

Next thing I’d look at is the outgoings. It makes no sense that the “recoverable outgoings” is larger than the current outgoings bill. Something squirrelly going on there.

3 year term is OK, bit suss that there is no option. After I’d read the lease and thoroughly understood it, I’d waltz in to the tenant and ask him what his intention is. The other thing I’d ask is, as a percentage of his gross turnover, what is the rent plus GST plus O/G’s worth ?? 15 / 20 / 30 / 50. The lower the number obviously the more secure his business will be and hence your anticipated cashflows. He might tell you to take a flying leap…which is OK…nothing ventured and all of that.

Good luck with your potential deal. [specool]

Heya me ol’ mate Deb,

Look, dealing in commercial property isn’t some big conspiracy where everyone walks around with heavy trenchcoats on and whispers under their breathe.

Commercial Lessee’s are just normal people like you and I. Go up and have a chat. There’s no law against having a chat with someone.

The agent probably won’t like you doing it, but then so what ?? Be upfront and honest with the agent. Let them know that you do this with all of your CIP prospective purchases, and if they want a sale, they better get used to that fact.

Best to get along with the tenant anyhow, if they are going to be with you for the next 10 years, may as well be happy with one another. You’ll be looking after each other, which is usually very different to what you are used to in ressy, she’s usually all one way traffic in those deals.

In terms of what you can put in a written offer, anything goes literally. Don’t be afraid to put anything down. As you’ve probably read in some of my other posts, I don’t like playing games with my offers though, if the deal is good and alot of value can be extracted from purchasing the property – why muck around, go in low and clean…something that may squeeze the vendor dollar wise, but be very attractive to them in all other respects. They want your cash, not your ‘get out’ clauses. If you really want to get out of the deal, don’t write up an offer – simple.

If a purchaser wrote “subject to the tenant signing up a 10 yr lease”, I’d probably have a good laugh and throw the offer straight in the bin. Others may accomodate it, but I think it’d be rare.

Good luck with your endeavours people.