Hi All,
After having to make a quick decision I've put pen to paper and have just opted to purchase a factory unit (off the plan). Theres a deposit to be paid now then the rest once title are issued. (early 08)
After not having any experience with commercial property I was wondering if anyone has any advice? Anything I should be researching or finding out about the place before proceeding with the purchase?
I have 7 days to come up with the deposit so I was going to use this week to do all the neccessary research to make sure I'm making the right decision.
Rgds
Wayne
One thing I would do is find out which real estate agents in the area list the majority of commercial properties. The agents in my area can give me a pretty accurate guide to both the demand for type of property and what the market is currently paying/asking per sqm in a lease. They should be able to do the same for you.
Hallg
Hi Hallg, Thanks for that. I will ring around and get some feedback. One thing I'm a little concerned about is a few special conditions in the contract. There are as follows;
- This offer is subject to the buyers approval of the Sellers Special Conditions.
- This offer is subject to the buyers approval of restrictions of used issued by both the City of Wanneroo & Landcorp.
I've asked for a copy of these (which the agent is sending through) though my concern was that there could be some conditions in there that make the place less attractive for a future tenant. I guess there question here would be to ask if it’s usual for the council and seller to issues such special restrictions or conditions? Rgds Wayne
Hi Waynel2, I have not had the experience of buying off the plan so I can’t help you with the precise meaning of those conditions except to say you appear to be doing the right thing by trying to understand precisely what you’re buying. It is normal for a council to apply restrictions to the use of a site. Not sure about it being normal to have the resrtiction lsited as condition of sale (others may know?). The council in question will be able to you give a list of what uses are possible in the zoning. These possible uses will then be restricted given their proximity to other zonings. For example a few weeks back I looked at a site which had an Industrial zoning. The Industrial zoning would normally indicate that most things were possible except that in this case a Residential One zone was on the opposite side of the street. When I checked the separation requirements from a Resi One zone many activities were not possible. Your council should be able to give you a list of activities and their separation requirements from other zones if you think this is an issue?
Hallg
Hi Hallg,
Thanks for the reply. Yes, the unit is actually located one street away from residential housing, therefore I suspect this is why such a restriction has been put on them. I'll give the City of Wanneroo a call to see if they can give me more details.
I've actually just come across a map of the place;
http://www.landcorp.com.au/pls/portal/docs/PAGE/CLADC/DOCUMENTS/SUBDIVISIONPLAN.JPGThe unit we have put an offer on is located in the "Business" part of the map. I don't suppose you know the difference between "commercial and business"?
Btw, do you own commercial property? If so you do you use a property manager, and if so can I ask what %s you are paying?
cheers
wayne
Hi wayne, yes I own one Commercial property which is in a business zone. Business zone here means office/retail. Don’t have a Commercial zone here so don’t know what is permitted in such zones?
Don’t use a Property Manager but that’s only because everything fell into place (finding a tenant and the like) when I purchased the property. Have a great tenant but if they leave at the end of their current lease I think I would more than likely use one.Hallg
Hello Wayne
As I recently posted elsewhere on the forum I have a commercial property (wharehouse/office) which is being managed for me by a PM. I pay 10% letting fee and 4% management fees. This is in Melbourne.
Cheers
ElkaHi Elkam & Hallg,
Thanks for the replies. I have contacted a Commercial PM and am waiting for him to return my call. If you don't mind me asking, what yields are you getting on your properties?
Also, I've heard it's common for rents to be worked out on a sqm basis. Do you think this would apply more to offices, rather than units? Here's a pic – mine is the one on the right hand side…at the front:)
The yield is different for the different commercial property classes. Mine is classed as industrial and I get about 7% yield which is normal for this category.
Here is a link to a site were, from memory, the different yields for the different classes are given.
There is also lots of information about commercial property on the site so it's worth a brows.
Also this site from Michael Yardney is worth a read
http://www.propertyupdate.com.au/articles/49/1/Residential-Or-Commercial—Which-is-right-for-you%3F
Your property looks like it's a small showroom office unit. Have you looked at the area and seen what activity is going on there? When you have the agent on the line then ask him about the demand in the area for these style of units and whether he has any on the books and for how long.
Also search on this site for units similar to your in the area to see re rental/size etc.
http://www.commercialrealestate.com.au/
Hope this helps
ElkaHi Wayne, if I look at return on money spent I’ve been getting 9.6%. However in saying this I was able to pull in some favours from tradie friends for reno works which meant I saved considerable dollars. I have not had the building revalued since the reno, but if I did, I suspect I’d be getting a tick over 7% on the value.
Hallg
Hi Elka & hallg,
Hallg – Looks like your doing alrite out of yours! a 9.6% return is fantastic.
Elka, cheers for those links. I'll have a read through them tonight.
Yes, its a its a factory unit/showroom approximately 90sqm, with a 20sqm office on the 2nd level.
Unfortunately now the agent has the the O&A signed he hasn't been to helpful with the enquiries, so all the feedback I've gotten on this forum has been great.
Do you guys have residential investments aswell?
Rgds
Wayne
The agent you bought through is no longer being helpful? How strange.
Maybe contacting another couple of agents who deal in that area will get you more information, specially about rent and demand. This is also a good way to sort out who you will get to manage the IP for you …. assuming you are not going to do it yourself.A big difference between commercial and residential IPs is that it usually takes much longer to get a tenant with a com. IP. so doing it yourself may end up being a false economy unless the demand is high. Also the lease needs to be drawn up by your solicitor as it's much more complicated than a res. lease.
Yes, I also have 3 residentual IPs. This is my only commercial one but sometime next year I hope to be in a position to look for another.
Cheers
ElkaHi Wayne, no residential investments other than PPOR. Have managed funds & shares that have done well. I’m on the look out for my next commercial property but i would prefer to have a tenat lined up before I make the move. In my job I get the opportunity to interact with Managers of businesses and often I quiz them on their current & future accommodation requirements. Currently I have 3 different businesses who have invited me to present them with optiions. The trick with this is to get the timing right as my option will need to marry up with the end of their leases. One owns his site so that’s a little easier as he said he would lease out his current premises if and when I can provide him an option that suits.
Hallg
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