Hi
I’m thinking of investing in a commercial property, and I was wondering if anyone could fill me in on the important points to watch for with regard to how commercial differs from residential – eg GST considerations.
The place I’m looking at has alright looking figures – 2 side-by-side shop fronts, selling for about $200K, and one of the 2 shops currently rented out for about $17000 pa, and the rates are $6000 pa.
Any feedback on commercial property pitfalls or these numbers in general would be much appreciated.
Cheers
Hi nmcace
One of the main problems is that most banks will only lend on commertial properties over 10 years.
I have one that at the moment is O.K, But due to some changes it may fall into the -cashflow next year. ( but thats another story ). Have you checked with your bank on the term of the loan. You stated that “one of the shops is rented “
Why only the one & how long has the other been vacant, Why did the other tennet move out.
Just some thoughts
Regards
CraigcHi Craigc,
Thanks for the feedback.
At the moment, the finance shouldn’t be a problem because I’m just using an existing mortgage on my home.
I think the other shop’s been vacant for about 6 months. The agent was saying the owner hasn’t really been too fussed about finding anyone else, and he reckons he could find a decent tenant within 6 months
>>and he reckons he could find a decent tenant within 6 months<<
Wow, that sounds like a really good location.
Pisces133
G’day Craig…
Sounds like you better put the commercial idea on the backburner mate. As with most if not all R/E you will buy cheaper down the track
As for that Propert/Agent…. give that property deal with a 50% vacancy factor a big miss.
Cheers
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Hey Bill
Im with you I think that nmace would be wise to give the commerial property he is looking at a very wide birth. PeterM is right “6 months to find a tenant” is the R/E for real. I’m not sure what you ment by “put the commertial idea on the backburner” let me know.
craigcNmcace, I happen to have had a bit of experience
in buying and developing commercial property in country towns.The reason for my earlier response was in essence a knee jerk reaction as the agent’s advice means that more likely than not there is something drastically wrong and therefore the danger for buying a white elephant is great.
However ………………, looking at the details again it may nevertheless well be a deal.
If the present rent is the correct kind of rent then, upon getting the second shop rented, the nett return isn’t all that bad really.
It is extremely difficult (if not impossible)
to make a judgement without knowing more details.For example, things like
1. what is the population ?
2. are these shops well located ?
3. are there many vacant shops in the shopping centre ?
4. what kind of tenant is the second tenant and what kind of lease are they on ? (something that I normally wouldn’t care about as long as the location is excellent)
I would think it rather difficult to make a judgement long distance and would much prefer to ‘get a feel’ by walking through the town.
Why not email me and I will be happy to go into a bit more detail ? [email protected]
Cheers,
Pisces133
Thanks all for your responses. Keep ’em coming
As far as the stats of the town/location, the population’s about 20,000, the place I’m looking at is on the main street of the town. There are a couple of vacant store fronts, but not too many. As far as the agent’s comments go, I got the impression he was just being conservative in his estimates.
Like Peter said, the figures even on 50% occupancy aren’t too bad. I did go over to the town and it looks like a really nice storefront, and well kept, solid interior.
The guy selling the property is actually the current tennant, who’d be leasing one half of the property back with a view to reviewing the lease each year. Since he’s the one setting the first year’s rent, I figure that’d be a relatively low rate he’d be giving himself as well.
I’d also definitely be interested if anyone can give me any idea of what considerations should be made with regard to owning commercial properties. Eg GST, is insurance for a commercial property a lot higher than for residential, etc.
Thanks again for all your feedback
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