Going from housing to commercial property investment, how much capital is needed?

Discussion in 'Commercial Property' started by jai collier, 22nd Jan, 2022.

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  1. Scott No Mates

    Scott No Mates Well-Known Member

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    Only where legislation doesn't prevent it eg retail leases or on gross leases or where not all outgoings are recoverable.
     
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  2. Beano

    Beano Well-Known Member

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    It takes a long time to make a few million return each year .
    It took me 27 years to make a few millions each year and then you have to pay a million in tax.
     
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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    I dream of only having to pay a million in tax. :rolleyes:
     
  4. datto

    datto Well-Known Member

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    Didn’t know that. Another plus. Poor tenant pays for everything lol. Maybe all the outgoings are factored into the per sq metre rate.
     
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  5. datto

    datto Well-Known Member

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    In fines and penalties ? :eek:
     
  6. datto

    datto Well-Known Member

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    I heard mechanical workshops especially truck mechanics, truck washes etc are in lookout for properties to rent and command a higher return.

    I heard landlords don’t like these truck businesses for various reasons eg the trucks annoy surrounding businesses, there are limits on how long the trucks can park in the street, they’re noisy, dirty and some tenants have links to OMCG.
     
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  7. jai collier

    jai collier Well-Known Member

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    yes very true mate, if it becomes vacant you could basically go bankrupt
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Not when you already have 30%+ equity.
     
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  9. jai collier

    jai collier Well-Known Member

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    yeah awesome work mate, was this in commercial property that you have started making these returns?
    Maybe making that sort of equity is much longer than i thought
     
  10. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    The
    With commercial I have always had tennants over 30 years. Leases are usually 3-5 years, extended and paid for 12 months in advance . Vacancy is a non issue plenty of buisiness's wanting to expand and aquire quality locations. Had nil vacancies but constantly had people tell me they would be intrested in taking on the lease. The problem with commercial is satisfying lending requirements, high deposit needed and difficulty acessing equity. A million dollars equity in residential might get you 800k, with direct comercial might get you 400k or perhaps nothing. At least with an REIT you dont have to sell everything to take advantage of other oportunities but you can , and even buy back in at like 25% discounts reduce cost base and taxation levels.
     
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  11. Marg4000

    Marg4000 Well-Known Member

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    You can start small, maybe a unit in a factory complex?

    Friend bought a 150sqm unit in a complex, $350K off the plan about 4 years ago. First stage sold out quickly, second stage released with prices $100K higher, again sold out. Projected settlement August, 2019.

    Bumpy ride, decision to build both stages at once, delays, first developer went bankrupt, no action for 9 months, project bought by another builder, covid, lockdowns (Melbourne). Finally handed over just before Christmas 2021.

    Resales of his size unit mid-$500s. He is using it for his business so no idea of rentals, but all units in complex occupied.
     
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  12. jai collier

    jai collier Well-Known Member

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    Yeah i see so you need a lot of equity to get into it yourself, i heard you can put 30-50% down? Is there a lot more involved to that,

    Maybe investing in trusts that buy commercial property could be a better option & safer?
     
  13. Scott No Mates

    Scott No Mates Well-Known Member

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    Safety / lower risk comes from diversification - most trust are invested across numerous assets, different expiry dates etc.

    The alternative is multi-tenanted building.
     
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  14. jai collier

    jai collier Well-Known Member

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    yeah thats good to hear i do see alot of commercial property for around that price, great returns in the end
     
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  15. The Y-man

    The Y-man Moderator Staff Member

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    You can - but you have less control.

    This is because it needs the majority of unit holders to vote to sell.
    Nevertheless, some CPTS have "liquidity events" where you can sell back your units to the manager.

    The example I gave above is a bit convoluted, as it started with 3 properties and sold 2:
    Cromwell Property Trust 12 - Cromwell Property Group Australia

    But maybe using CH DOF
    Investor Centre

    I bought into DOF in 2014 paying 72 cents per unit.
    At the time the yield was 7% per annum (or thereabouts) - so we got 5 cents per unit (paid quarterly)

    So if you put $72k in, you would earn $5k per year in rent. The income would be tax deferred in some components due to depreciation etc so it is not acutally 100% taxable in most cases.

    Come to today and the underlying properties have shot up in value.
    The unit prices are calculated using the total banks valuations of the properties divided by the number of units on issue - so no different to your example of holding a $2m prop that goes to $4m.

    Today, the DOF units I paid 72 cents for are worth $1.57

    Charter Hall have a liquidity event every 5 years so I could sell my holdings realising a 75 cents per unit profit (less CGT of course).



    The Y-man
     
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  16. The Y-man

    The Y-man Moderator Staff Member

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    Yep - and many CPT/REITS will have portfolio of properties - so you "unit" may be spread across office towers, warehouses, shopping centres in different cities. That means you also potentially have hundreds of different tenants, so it would be very rare to have a complete vacancy.

    The biggest downside is you don't get a say in which properties are bought/sold etc - as you would likely be a minority unitholder.


    The Y-man
     
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  17. jai collier

    jai collier Well-Known Member

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    Well great information all the safer way to invest in commercial real estate is through trusts, as for purchasing bigger commercial property on your own you need to have some good capital yourself it seems, like over the 1.5m mark.

    i reckon i will stick to developing/ renovating houses to rent for now my first development has been great so maybe in my 30’s look at getting into commercial if my portfolio continues to grow well.

    thanks all for the advice new to this forum and im so glad i have come across it, get information from investors that are much more ahead and knowledgeable
     
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  18. The Y-man

    The Y-man Moderator Staff Member

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    You can do both too ;)

    The minimum investment into listed reits is $500 + brokerage, and unlisted varies but usually $20,000

    The Y-man
     
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  19. datto

    datto Well-Known Member

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    Not bad gains there!

    I wonder if you can use the units as security for a loan? Or do you need to sell them which may trigger CGT?

    See if you own a commercial property on your own, then you have more control and can access equity without triggering CGT.
     
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  20. Scott No Mates

    Scott No Mates Well-Known Member

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    Those don't count.
     
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