I bought a commercial property in clayton (industrial area)–> Garden Road approx 300k Inc stamp duty (high celing, and roller door). on Jan this year… rental income approx 1400 a month. The contract term is 3 + 3 …and is going to end this NOV. and is going to rent review..
How mcuh rent I gonna increase? any one know the area? the property size is 198sqm.
I am bit regreated of investing in commercial property as the property still the same until now. and i cant really re-finance to invest compare to residential property.
the neighboure who rented out at 7% of gross return. and another one who same block and trying to lease about 6% returns.
am i possible to get rent increase to let say $1750+gst a month???? because the contract term is 3 years fix rental.
Normally how much to put it up when if is fixed term?
Please advise
What are the terms of the rent review? Is this the current term the last term or is the option still to be exercised? If there is an option to be exercised then you will need to read the rent review clause as it will be quite specific as to how the new rent will be determined. It may be one of many methods but commonly: fixed increase, cpi, cpi with ratchet, market. The latter will require you to have an understanding of the market and of market rents as well as how market rent is to be determined – you may need to consult a valuer if there is a dispute over market rent.
You will need to ensure that the option is exercised within the option period eg may be between 9 & 6 months from expiry or 9 and 3 months etc. The risk will be that they don't exercise their option.
Hello Terrance
Am I right in assuming that you're not using a PM.?
You might think about getting yourself one as a good one is worth the money I think.
I have an industrial property the next suburb up from you, Mulgrave, and would be happy to recommend my agent who is just terrific. Very efficient.If you're interested I can private message you the name of the agent and my PM.
Cheers
Elkathe terms of the rent review is 6 months from expiry date and fix another 3 years…so i still have time to put up the price before expiry date.
from previous owner, they dosnet increase rent based on CPI…only based on fix 3 + 3 years. and rental is negotiable.
what is the normal ROI for commercial property?
is commercial property in melbourne been increased?
elkam wrote:Hello Terrance
Am I right in assuming that you're not using a PM.?
You might think about getting yourself one as a good one is worth the money I think.
I have an industrial property the next suburb up from you, Mulgrave, and would be happy to recommend my agent who is just terrific. Very efficient.If you're interested I can private message you the name of the agent and my PM.
Cheers
ElkaI am not familiar with PM, and how actully use PM to help me. but is different to let them manage my property rite? because what i though the Commercial property is much less hassle than residential property as the tanent pay everything.
actually my rent return only 1370 + gst….very low : (
Becuase i see is very nice location …is just between princess highway and willington road. here is the similar property http://www.realcommercial.com.au/cgi-bin/rsearch?a=o&id=5384134&f=20&p=10&t=com&ty=&fmt=&header=&cc=&c=76110906&s=vic&tm=1214264556
Whether the tenant pays everything is again dependent on the lease but usually the lease includes all outgoings.
It's certainly true that a commercial property has less day to day problems as the tenants don't ring you because a tap is dripping or the doorbell doesn't work but it still needs management.
All bills are sent to my agent who then bills the tenant. I certainly wouldn't get the bills sent directly to the tenant as you have no knowledge of whether it's been paid or not. Imagine the tenant not paying the insurance and you not being aware of it, for example. They also do inspections and make sure things get repaired/replaced/repainted if necessary specially if the tenant is leaving.
At the end of a lease period it's their job to do a market review and advise you what the market rental should be for your property and then negotiate this with the tenant if they intend to stay. If the tenant is not staying the agent puts the property on the market in time so as to minimise any vacancy period. Commercial property does not re rent as quickly as residential property specially in times of economic downturns.
There are regulations related to commercial property which even differ between classes of commercial property (retail, office, industrial) and it's up to the agent to make sure my property complies with these.
Yes it seems a nice location and if your property is as new as the one in the picture you should have some good depreciation so I hope you have a depreciation schedule.
Commercial property rental is priced by the square meter. Seeing the large difference in buying price between your property and the one in the link you posted I assume yours is smaller?
Industrial rental return is typically between 6.5 – 7.5 % depending on the length and terms of the lease and on the quality of the tenant.
Cheers
Elka
Surely if the lease expires in November 2008 then six months before expiry has passed.
Does it also say in the lease that the tenant has to notify you of their intention to take up the option or not 6 months before the lease expires?I don't know if it's possible but you wouldn't want to get caught with the tenant claiming that you can't put up the rent because you didn't notify them of it six months before the expiration of their lease.
As I pointed out earlier, you need to read the rent review and the option provisions to understand what is permitted and how the rent review will be enacted. If you don't want to use a property manager speak with your solicitor or a valuer who will explain your rights for the rent review.
i need to get my full contract..it seem to be missing some part..need to get it from agent…
i think i can put up my rent at least 6 month but no less than 3 months….the contract term is based on market valuei will have checked with my solicitor…..
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