All Topics / General Property / Commercial Property Investing

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  • Profile photo of unifiedunified
    Join Date: 2004
    Post Count: 7

    Hi guys, need help, new to commercial property investing.Have found a cf+ freehold on food business in a small group of shops in suburban Melbourne. Could you tell me is there the same capital growth expected from commercial stuff as there is on residential. Also things to look out for when buying commercial, can we ask for business financials etc..

    Profile photo of garrytasgarrytas
    Join Date: 2004
    Post Count: 36

    Welcome Unified,
    I`ll start the ball rolling!
    IMHO Important things to look for
    What is the history of vacances in the shopping strip How easy would it be to rent if the tenant falls over.
    How strong is the tenant, for that you would need to see his trading figures,personally I would not like to see his rent at more than 10 % of his turnover and pref 6/7 %
    Do a credit check on him to see what his payment
    history has been like.
    Over to the other guys
    Regards garrytas[cigar]

    [email protected] Always have cashflow positive Tasmanian commercial properties

    Profile photo of unifiedunified
    Join Date: 2004
    Post Count: 7
    Profile photo of wilandelwilandel
    Join Date: 2003
    Post Count: 761


    Why do you think you have the right to look at a businesses trading figures? I haven’t heard that before… If I were a tenant in a premises, I wouldn’t want to provide figures to anyone just because they are buying the freehold.

    I certainly didn’t ask our long term tenant to provide figures, when we bought a commercial premises.

    The rental return is also kind of a way that you get “capital growth”… Just say – you purchase a commercial property at say 10% yield, then sell when the yield for the area is say 8%. Also, check the lease to see if it increases annually with CPI…

    Always get an accountant’s advice before signing, because of GST issues.



    Profile photo of thecrestthecrest
    Join Date: 2004
    Post Count: 992

    Hi Unified
    There’s a lot to check with a commercial property.
    It’s only as good as the financial strength and stability of the tenant really. The vendor should provide you with the rent record and the complete file of all correspondence with the tenant,which can be revealing. Other records to request are rates, maintenance expenditure, water consumption, Council correspondence etc. You should also have access to the tenant for a discussion, see what his plans are and any complaints about the building, neighbours or vendor. Chat to the other shop tenants and owners.
    Small groups of shops are vulnerable to competition, especially if a bigger complex is planned nearby. Get an expert to check the lease very thoroughly as the buyer will have to comply with it. Check the bond amount ? Why would anyone sell a cf+ property right now ?
    Hope it’s a good deal for you, good luck

    thecrest | Tony Neale - Statewide Motel Brokers
    Email Me | Phone Me

    selling motels in NSW

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