Hi Guys,
I'm sure I can do this, but if anyone has any advice to help me along I would be very grateful, especially because I have only just read 0 to 130 properties in 3.5 years and am brand new to this forum.
I have actively scoured the internet and realestate magazines trying to find an investment property that will give positive cash flow from day one. To be honest I havn't found much and I did become a little disillusioned, I am finding it very hard to use the 11 second rule but feel that being a novice this would be easier and lest risky for me, rather than a wrap or to try and gain captial gains quickly.
I have found my first property which I have became interested in, a run down of the property is that it is a Commercial property with tenants that have been there for six years, I asked the real estate agent how long the rental agreement had left as the tenant is paying $1200 Per Month, which is very good, the real estate agent replied saying that the lease was up and the tenant is paying on a month to month basis at the moment. Is this something I should really take into consideration? Should I pursue wheither or not the tenant could be planning to leave any time soon?
The property is being advertised at $175,000 + Gst. I am unsure what this Gst is. If you have any idea, any advice would be greatly appreciated. The real estate agent advised to talk to my accountant about gst. Since I havn't actually bought a property yet and am only 20 years of age I dont have an accountant, should I really pursue getting an accountant before pursuing property?
If there are any questions you guys would be asking yourself and the vendor, agent or tenant before going through with the deal, please let me know, as I really want to do my due dilligence before making any rash decisions.
thanks heaps for taking the time to read guys, especially because im new. Im sure you get many emails like this all the time, but any advice would be greatly appreciated!
Cheers,
Aaron Moffatt
Aaron, you are considering spending $175k without advice – hmmm. GST – specialist tax area, might just be worth getting an accountant (& a solicitor) – it'll save you $17.5k in one foul swoop (are you purchasing the property as a 'going concern & will it pass the test?).
11 seconds to carry out due dilligence????? It took me longer than that to read your question, check your projected return & get motivated.
As it is commercial property you will get a loan for about 70% of its valuation – risk is higher & the financiers realise this
a) do you have access to the 30% deposit, about $52,500 + gst; or are you securing the loan with other assets
b) is it a gross or nett return? – ie. who is responsible for the outgoings, what are they & how much will they be costing?;
c) How long has the tenant been on holdover?
d) Has the rent been reviewed in accordance with the holdover provisions of the lease?
e) Assuming that the tenant vacates before settlement, what rent will be achievable?
f) How long will you be waiting for a tenant?
g) What incentives will you have to offer to lease the premises?
h) Can you sustain the lack of cashflow for 6-12 months? Assuming 3 months + vacancy, 3 month incentive/rent free & 3 months
gross rent commission paid to the agent?
i) Do you need to register for gst? What are the advantages/drawbacks of registering/not registering?
h) Prepare a cashflow analysis of the property (DCF & IRR) and itemised budget, factor in rent, vacancies, outgoings, management fees, insurance, interest etc. This will help your case with your financier to show that you are aware of what you are getting yourself into.Hopefully the above might give you some inkling as to what to think about.
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