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Viewing 14 posts - 1 through 14 (of 14 total)
  • Profile photo of keikokeiko
    Participant
    @keiko
    Join Date: 2008
    Post Count: 513

    hi what commercial building would you prefer to buy
    1.something on a main road
    2.something on a side street
    3.an old building and reno it
    4.a new building
    5.a tennanted building
    6.no tennant if the building was priced right
    7.high stud
    8.single level building
    9.triple story building
    10.?
    11.?
    12.?
    13.?

    What else do you look for when buying
    what would you look for if you were leasing a building

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,847

    I generally look at 2 sorts of buildings: Vacant buildings (10-30 yrs old) or Vacant Buildings 30 yrs +

    The first – basic tidy up, new lights/tearoom, paint, cleaning, Fire safety certificate, strip out partitions & refurb office space, steamclean floor/walls. Good, easy rentals.

    The second, require a little more time however are suited to demo & rebuild. Issues include asbestos and delays at council but you will have a new building comanding a premium (providing that it is well designed, meets market expectations etc).

    Location (main road/side street) determines some of the uses that will consider the premises and rule out others. I generally lean towards feeder roads (access is good, on-street parking, proximity to take-away/facilities).

    A tenanted building has instant cashflow however, without a good understanding of commercial leases you may not fully appreciate what you are getting yourself into (types of rent reviews, make good provisions, demo/relocation clauses, ownership of fitout etc).

    Profile photo of god_of_moneygod_of_money
    Participant
    @god_of_money
    Join Date: 2008
    Post Count: 971

    If you buy an empty commercial building, you have to pay GST.
    Complex GST structure etc,… i.e. above 75k you need to register for GST.
    Can be dauting experience to get a tenant…ie long period of vacant rent

    Profile photo of judithscottjudithscott
    Member
    @judithscott
    Join Date: 2009
    Post Count: 13
    god_of_money wrote:
    If you buy an empty commercial building, you have to pay GST.
    Complex GST structure etc,… i.e. above 75k you need to register for GST.
    Can be dauting experience to get a tenant…ie long period of vacant rent

    "If you buy an empty commercial building, you have to pay GST." I agree with you

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,847

    I usually get the vendor to agree to a very short term lease-back ie 1 month (or less), rent is factored into the sales price & settlement is made as a going concern.

    Profile photo of Michael 888Michael 888
    Participant
    @michael-888
    Join Date: 2005
    Post Count: 260

    I am no accounting expert, however I was under the impression that such type of lease back would not be a "going concern". This is a grey area. Such a short lease may not be viewed upon by the ATO as a going concern.

    Agree however that the implications of the lease you are inhereting with the building need to be understood.  If you are purchasing vacant, you need some idea of cap rates in the location and what you could lease it for in this market (realistic rental) bearing in mind vacancy rates as well. That will influence your max purchase price.

    Personally, if it were office building, I'm with Scott, feeder road location would be preferrable. If you are looking for industrial, main road; the busier the better and preferably a corner for me.

    Don't get too hung up about GST. If you need to pay on purchase, then claim it back at the first BAS. It means having ongoing GST and BAS work to do, however that would have been the case with a CIP with income over 75 K anyway. The other drawback is having to find (borrow)  the GST to pay it whilst waiting to be reimbursed after the first BAS.

    Profile photo of shubhshubh
    Member
    @shubh
    Join Date: 2009
    Post Count: 22

    I will prefer to have single story building needing little modification. Every commercial property we buy for business purpose needs modification or interior fitting. The customer  turning ratio is more in single storey building than in multistory building.     

    legal foreclosure


    Profile photo of Jacob MartinJacob Martin
    Member
    @jacob-martin
    Join Date: 2012
    Post Count: 13

    A building near people because I can do business there and those people who will later on be prospective clients won't have a hard time checking out my business…

    Profile photo of TheFinanceShopTheFinanceShop
    Participant
    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Warehouses in inner city are huge right now. Good, stable market and strong yields.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of JhaiMitchellJhaiMitchell
    Member
    @jhaimitchell
    Join Date: 2012
    Post Count: 30

    I asked "What is the cheapest, high demand, positive cash flow real estate you have found?"                                                                                                                          (From james) "Hi , Im pretty much focused on commercial property , theres so many good deals out there . Just before xmas I helped a guy get his first comm property showing over 12% net return , was at 330K , so affordable. Hes paying about 6% for his money so its cash flow positive from day one. I think you do need to focus on one area/type of property so that you can know a lot about it and this makes it easier for you to get a bargain, high cashflow deal"

    james

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    Profile photo of MSaliMSali
    Member
    @msali
    Join Date: 2012
    Post Count: 3

    I am currently looking for a commercial property (possibly an industrial park) for around $300k with at least an 8% yield.

    Where did you find such a great deal?!

    Thanks in advance :)

    Profile photo of MrWinfieldMrWinfield
    Participant
    @mrwinfield
    Join Date: 2009
    Post Count: 17

    Well put James, short and affective communication and straight to the point. It’s in the numbers!! Gee that “guy” got a great bargain, well done.

    Profile photo of Rhys AdamsRhys Adams
    Participant
    @rhysadams
    Join Date: 2014
    Post Count: 14

    Hi Keiko

    If you’re looking for passive investment I’d be looking for a property with a long term lease to strong tenant. There is more profit on offer with the vacant/near expiry strategy but commercial property is not like resi where vacancies are easily filled and this strategy might be best left to more experienced investors in this asset type.

    And assuming you’ll be looking for debt funding, a short lease expiry profile will be something that you’ll need to mitigate somehow or face higher debt pricing.

    In looking at investment risk in commercial property you need to consider the following aspects and determine what level of risk/return they are looking for:
    •The property’s tenancy profile;
    •The strength of lease covenants;
    •The lease expiry profile;
    •The property’s location and future supply and demand; and
    •The condition of the property and likelihood for future capital expenditure.

    All the best, I am a firm believer in the fundamentals of investment in commercial property when done properly – yielding >8%, a good commercial property will be spinning off decent cash with borrowings available <5%.

    Where are you looking at buying?

    Cheers
    Rhys

    Rhys Adams
    http://www.redcommercial.com.au/
    Email Me | Phone Me

    Commercial Property and Construction Finance Specialist

    Profile photo of VandoVando
    Participant
    @vand0
    Join Date: 2014
    Post Count: 12

    That’s a great return James, where was it and what type of property was it?
    Cheers
    Vando

    Vando | Surf&Yoga
    Email Me

    Experienced property developer offers passive investment... 9.64% net PA, no gearing.

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