Hi folks, I've been reading, but I can't find a simple explanation of the process and steps of buying a commercial property in Australia (specifically, NSW). Would someone with experience mind sharing the steps and what the relevant paperwork at the steps might be? I realise that commercial can be less standardised than residential, but even so, there must be a "typical" sequence that is followed? Cheers!
View, due diligence, offer, contract preparation, negotiate, negotiate negotiate, exchange. The main difference is that the contract isn't required when listed for sale but after terms are agreed.
Thanks for that - a couple of follow-up questions: What would the due diligence involve, if it's prior to making an offer? How much information will the vendor give you prior to any sort of agreement between you? Assuming there's financing involved, at what point do you contact your lender/broker?
Due diligence, scope depends upon the property. Strata minutes Development Approvals and consents (tenant consents, usage) Zoning compliance Leases Security (bond/personal guarantees, first born etc) Weighted Average Lease Expiry ie risk profile Rental market analysis (commerciality of rent & incentives which are in the lease) Vacancy rate Building services (plant and equipment reports eg. Lifts, fire services, hydraulics, electrical supply, air conditioning, telephony/fibre connectivity, cranes/hoists) BCA compliance/building reports/structural survey Degree of obsolescence eg small floor plates, low roof height for storage, column spacing, Competing premises both constructed, under construction or approved/planned Independent valuation Some of the above requires legwork or consultants. Before some information is provided you may need a confidentiality agreement however the IB will generally provide a brief summary of the financials. You will need to request the leases to substantiate the details. I'd engage with a broker like @Corey Batt sooner rather than later to confirm availability of finance.
@Frode I'd also take into consideration potential CAPEX in your cashflow analysis. If possible, try to get a better understanding of the tenant(s) and their strength as a business (ie are they making money)...Also are they paying on time? Are there arrears? Insurance another thing that goes without saying. Definitely speak to someone about finance. As for a valuation, maybe try and figure out which bank you'll go to first and then find out who their panel valuers are...that might save you paying 2 valuation fees (some banks prefer certain valuers for commercial ppty).
And if its owner occupied at a silly high amount per annum, beware as its likely a pump and dump with market rent well below what you expected
Capex is determined from the DD - lease expiries (opportune time to undertake works), Building Services/Obsolescence/BCA etc reports (condition of services/structure). There's no point of getting a report if you don't know what to do with it (have someone explain the purpose of the report and how it can be used).
