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 buildingI 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).
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 rentgod_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
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.
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.
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.
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…
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 MeResidential and Commercial Brokerage
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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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
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.
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
RhysRhys Adams
http://www.redcommercial.com.au/
Email Me | Phone MeCommercial Property and Construction Finance Specialist
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