I have recently viewed a property in country NSW – currently a mix of commercial and residential returning roughly $400 pw in total with scope for $500 pw. This on the outside looks like a %RY of over 11% and would probably be +ve CF, however the vendor has achieved this by splitting a 80YO property into 3 resi units and 2 office spaces, one of which is currently vacant and a junk storage room. The existing commercial lease is at risk and the tenants are risky. This place has problems written all over it – and with the ‘problem+solution = profit’ mantra, would most likely be a great bet, however it seems to me that the owner has already profited by creating problems and is now trying to sell the property at a higher capital value based on the rental income which is at very best shaky.
From what I learned at the masterclass, it would be tempting to try and fix this one, however it appears that any fix would most likely result in a rent reduction rather than an increase. It’s almost like the cow has been milked to the last drop and is about to fall over in a big steaming heap.
Additionally, the agent was listing this at a far larger land size than is actually on the contract!
I have decided not to pursue this one at present, but I am interested to see if anyone else has come up against this sort of issue and what you did to overcome the problem…
Mark
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