I am looking at an arcade of 7 shops- the building is in desperate need of cosmetic improvements and the owner has not touched the building in 15yrs!.. It is in a prime position and 5 of the shops are currently leased at well below the rental medium for this area (due to the ugly facade)
Myself and a friend are extremely interested in this property , she has a home and another shop w equity around ($900k) but has zero income outside of her modest takings from her shop – I don't own any property but have around $100k and also a business which provides around $150k p/a
My business is starting up cafes restaurants and retail shops and we have successfully done this for the business and clients.
the idea is to buy this property , and start up two businesses in the empty shops to provide a cash flow for us both .
Firstly I am looking for a broker that can help w this mortgage as we want to use her equity , we have asked for vendor finance for 35% but I don't know if this wil be aaccepted and if it is the best way to ggout would be great to be able to purchase this property and do the cosmetic renos on this and get it all financed under the same loan, currently the tennants would cover 75% of the full loan as is… I am also wondering if its a good idea to purchase this property under two seperate companies or do we start a new company together to purchase
i would love to hear your thoughts and ideas on this….
thanks
Amélie
You should not use a company for many reasons. You need to seek legal advice on the structure as there are a number of issues. Set it up wrong and you could lose money and pay for tax and suffer asset protection issues.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Seven shops will also be classdd as a shopping center under the retail leases act so you’ll need to be aware of any restrictions which then apply as the lessor.
You would be looking at a commercial loan for the purchase but I wouldn't recommend purchasing the property under a company. Speak to a professional about the purchasing structure.
You need to speak to a broker or a banker about drawing upon the equity against the current property. The application would need to work just on her details and income and not on your income. Again best to speak to a broker or banker about potential options and how the application can be structured.
TheFinanceShop | Elite Property Finance
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what's the gross and net rental yield?
Company is not usually a good idea for property holding.
Make sure you have an extensive unit holder/ shareholder/ JV agreement
sounds interesting
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
Thank you so much for your feedback..it's good to get an incite from other investors … I will definitely seek legal advice and speak to a broker about the best way to set up the loan structure
– thank you again
Amélie
You should also seek advice from your accountant to advise on structure as well.
As a property manager, we would recommend that you do some investigation into the legalities of purchasing the shopping strip under a business (if the two of you are purchasing together and you decide to purchase underneath a business, you would be better off starting one together to make sure there are no uncertainties regarding who has what sort of claim). If the shops were to experience a legal issue, you must know what sorts of issues may arise for your business.
You should also speak with a mortgage broker and a financial advisor regarding the best way to take out a loan for the shops and the best way to maintain the funds. Do not forget that you are relying on being able to redo the shops in order to get the best rental return – once you have purchased them, will you be able to afford all of the renovation works or will you have to save for a few years?
My questions are why an arcade strip of shops?
Foot traffic in arcade strips have declined over the last few years as more people tend to go to shopping Centre.
I am not sure what state you are in but in Victoria city strips are dying and they have very high vacancy rates.
Just really do your due diligence, retail is very though at the moment and also ask your self when have you ever saw a big brand open up on a strip?
most are heading into big stores.
PS coles and safeway are not looking at strips any more as they develop their own stores and shoppping centres.
Oh if you do move ahead with this, call up the local council and see what zoning and type of shops you can have…
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
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