Forum Replies Created
- 888Abundance wrote:Display Home – what kind of tenant?Hi Dwv
Just a few different considerations you might want to think about apart from what has already been said.
Is the display home only to be used as display (?) or is there a likelihood that the developer will 'occupy' at some point. There are three issues with the answer to this.
If used only for display, they might be considered as a type of 'commercial property' for the duration of the display plus the two extension options. If so, you might want to include in your contract 'clauses' for all outgoings to be covered by the tenant and a 'makegood' provision of some type.
Also this may determine what insurance cover you need as it may not be viewed as a 'typical' scenarion for a landlord's policy for residential property. The amount of customer traffic might raise some additional public liability issues. Also it might be interesting from a quantity surveyors perspective whether the higher traffic would lead to more rapid depreciation lifespan.
Perhaps you could use these issues for leverage in getting a better leaseback rental rate and terms & conditions.
Best of luck.
Hi Gary,
The house is currently their office & display home. I think they will be there for a few more months then they will move out to another office. When they do move out they will then put the kitchen, study walls and 2 bedrooms upstairs. Currently, the walls and kitchen aren't there as they have their boards and maps + upstairs function room. When they transfer to another office, they will rebuild the property and will become a display home.
Could you further explain what you meant by "include in your contract 'clauses' for all outgoings to be covered by the tenant and a 'makegood' provision of some type?" What would be the disadvantages if it were considered "commercial" by the bank? I haven't seen the contract yet but I will have it by Wednesday this week, I was told. I'll make sure I'll read through it.
I haven't thought about the traffic leading to a more rapid depreciation lifespan. Who can I ask regarding this? Who decides the depreciation value anyway? Maybe I can justify the increase in yield if I could understand this more (Getting paranoid…)
Have just called my broker and she told me that I can borrow without using my equity. The way it works is, since we have 40K offset and 25K in the redrawal facility, we can pay the 57K needed for a 95% loan (including LMI and stamp duties, etc). Then she said I could include the 10K LMI into the loan and we'll just pay 47K with the offset and redraw facility. We'll have a few more thousand left for our cashflow (although we really don't want to deplete this further). Our loan will be around 485K and 3100+ per month repayment fixed for 3 or 5 years. So whatever happens, our PPOR will not be connected to the IP. I do hope the bank approves and value the property as is.
