Not sure if there is a thread about this or not. I also have this question on another property forum.
I have to admit that I've never been to a commercial property auction before and planning to go to have a feel of the commercial property market.
So again the question on what to look?
What do I ask the Real Estate agent?
How do know if it's a good investment or not?
I know the questions are a bit generic that's why I ask what you look for to give us a bit of an insight.
Thanks.
1. What uses does this place have? can it be a food out-let? a car yard? a repair shop? a office? etc… this is probably the MOST important question as different use and industry have different “expected return”
2. How does the bank look at this property? is finance easy? …if finance is hard the price should be low or the return should be much greater!
3. What else is around this property? from experience the shops around the property tends to tell you what sort of “business” to expect and what sort of clients the business may get.
4. Strata cost and the rules/law ( Strata shops…ie village, arcade, shop front) – Some Strata have a requirement that the new “business” owner can not take over a shop UNLESS they have experience in that field…Or they may limit how many “bakery” can be in this one area etc…
5. What sort of business would like this property, a cash flow business??? ie food outlet, a risky business?? ie Video store…
6. If the place is sold with a current tenant in place- make sure you check when the agreement ends and what sort of agreement it is ( 5:5? or 5:7?? etc…) and lastly how long have this business been running and how is the business in general.
end of the day the commercial property success runs purely on the success of the existing or “potential” business… commercial property has high vacancy period…and when your paying 9% + in interest and other cost ( Strata , insurance, land tax) it can be quite hefty.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
> With Commercial it's all about "traffic", "street frontage" and " parking". Business Zone 1 ( retail) and Industrial Zone 1 ( factories and workshops) are the best you can get.
> Great thing with small factories, you can do Industrial leases and Retail leases ( just apply to council, they usually ok it if there's enough parking)
> Factories with a Retail lease are great if they are in a busy location. I stay away from Retail shops as most of this has moved to the large shopping centers like Westfield. But there are some good buys around
.
> I tried to buy an Industrial Zone 1 factory in Carrum Downs a couple of years ago, but it sold in 6 hours ( 4 guys in line before me).>It was a new 370 square meter factory with a retail lease right on Frankston Dandenong road. Asking price 355,000$, with a 25,500$ a year long term tenant.
> Next time I'll go straight to the Estate agent and sign the Contract, subject to measurements of 355 sq meters.
> Best part with Commercial is the tenant pays all "outgoings" Body Corporate, Insurance, Council Rates, Water etc.
> Our family has 12 small Commercial factories workshops. They are easy to rent out, great return on rent, and low maintenance. If you buy a Retail shop or Factory in a good spot, you never sell it.
I would only look at a commercial property if I had enough residential property assets to back me up. Commercial property is very unforgiving because usually larger sums are involved and you can have very long vacant periods…
thanks…>You can buy small Commercial Industrial properties from 130,000$ to 200,000$ to suit your budget, with a 6-7 % return on rent.
> My insurance broker has retired with his house in Mount Eliza paid off, and bought 2 Industrial 1 investment properties as a nice money earner on the side to help with retirement.
> My father did the same. Family home paid off, and 2 small Industrial Zone 1 properties with a 6-7% return on rent.
> Concrete factories also are more maintenance free then houses or flats, Troublesome tenants in Residential (10 week process through VCAT) can do thousands of dollars in willful deliberate damage, that Insurance will only partly cover. Factories have 4 concrete walls and a tin roof ( very low maintenance). Troublesome tenants easily evicted. Give them a 2 week "notice to quit" and change the locks.
> Our family has owned small Factories since 1986, and the vacancy rate is very low ( just don't get greedy with the rent.) My 168 square meter concrete factory in Dandenong was about to be vacated ( lease expired) so we put an add in before the tenant vacated. Add went on the internet on a Wednesday afternoon, and got someone new in the next morning with a 2 year lease.
He moved into the premises the very same day the old tenant vacated.>They are also a great learning experience when doing business ( put you in touch with tenants who do well financially) , And a stepping stone to starting your own business.
The fundamentals of looking at property are the same regardless of zoning. You essentially need to
1. work out your comfort price and the return that you want.
2. decide which location.
3. decide type of property i.e retail, commercial, industrial etc.
4. understand past and potential vacancy rates.
5. make a decision on the type of usage.
6. what are the costs to hold.
7. can improvements be made and if so at what cost.
8. what is the exposure, parking, signage etc,
and everything else that goes with generally searching for any investment.
If I was looking at entering the market I would also attain copies of the various acts (Retail, Commercial) as well as local council requirements to have a basic education of what you are planning to get into.
Thanks to all that responded. It's much appreciated.
In regards to the response, would you be able to specify if the response is from your own experience, experience from somebody you know or heard about, something that you read, etc… I read a lot of books, materials and stuff and know things about commercial property on a theoretical point of view.
Just makes the thread easier to follow in my opinion.
Hi ForeverStudent
You must look at the location. This might be very basic but you would be amazed at how different the location may be today compared to even a couple of years ago.
You also want to find out who owns the property now, when they bought it, what they paid for it, who has the mortgage and when it is due, the deed and the title information too.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
