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Discussion in 'Commercial Property' started by gogo419, 26th Aug, 2015.

  1. gogo419

    gogo419 New Member

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    26th Aug, 2015
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    Location:
    Melbourne
    Hi all,

    Just stumbled across this forum and have been reading up. I am currently looking to enter the commercial property market.

    I was hoping someone is able to give me some guidance for financing. The property i am looking at has a yield of 6.6% plus another 1% approx from carpark revenue.

    The current tenant recently spent seven figures fitting out the restaurant/bar and signed a 35 year lease. (There is still 30 years left). Given the long lease term would this allow for a higher LVR?

    Who should i be talking to about getting a loan? Directly with the banks? Or with a mortgage broker.

    I am currently thinking to purchase it within a family trust does this makes things a lot harder to get finance etc?

    Approx what amount of fees should i be expecting to pay for the loan on borrowings of $2.5-$3mil?
     
    Azazel likes this.
  2. Azazel

    Azazel Well-Known Member

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    Hey @gogo419 , good on you for looking into it, commercial property can seem a bit daunting.
    Contact a broker for sure, might be 1 or 2 around here...
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Personally I would also consider the need to perform due diligence over the entire deal. What is the quality of the tenant? (How many ASX companies last 30 years?) Are they consecutive leases or options? How hard to relet if things go awry?
     
  4. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    35 year lease is a dangerous one, it puts all the control on the tenant and not you if the terms negotiated were not favourable to the lessor. Market reviews, ratchet clauses, bond/guarantee topups etc.

    You would need a lease review by a good property and leasing solicitor before you even started talking dollars.
     
    RickProp and hobo like this.
  5. RickProp

    RickProp Member

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    Also if lease consists of options (as term is very long), the term until expiry of the initial lease period seems quite important for finance purposes. Can the property be used for alternate purposes should the tenant not take up an option/go bang etc?

    That is a pretty sizable deal IMO for first cip investment, it is always good to have eggs in different baskets if the ..... hits the fan, I guess it all depends on one's balance sheet.
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    It's sub $3m, no biggie but there's better multi tenanted buildings around.
     
  7. RickProp

    RickProp Member

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    Agreed if one has diverse investments and not putting all savings into it.