Random observation why it's much easier to buy resi property (and resi OTP) over commercial

Discussion in 'Commercial Property' started by Gockie, 16th Nov, 2016.

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  1. Luke T

    Luke T Well-Known Member

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    -This is the big question as to why not?!!
    My thoughts-as mentioned before;
    A) the larger deposits
    B)the banks being harder in downturn
    C) fears of losing tenants or not being basle to find another
    D)people not knowing enough about it
    Where are they ?
    Take a look at the figures on realcommercial ,then go out and get on the ground-this will help build yr confidence.
    I have found that doing the fitout and sometimes even providing their equipment is a great way to go too as saves the tenants outlaying the cash and it creates the vision of the business for the tenant so they dont have to wonder and be afraid of how would i set it up and would it work in this space.
    I ahve found these setups are the most successful properties that i have
     
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  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Providing an incentive is one thing but without adequate safeguards this can be very risky as the cost of failure is borne by the lessor - it is better to provide an incentive or capital (loan) which is recouped by higher rent over the life of the lease.
     
  3. albanga

    albanga Well-Known Member

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    Sorry all but some of the statistics being spouted here are just incorrect.
    A number of lenders will do 20 year loans with some doing 10 year interest only and NO annual reviews at 75% LVR. Right now ING are doing 4.34% under these terms which is somewhat comparable to a resi IP loan.
     
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  4. The Y-man

    The Y-man Moderator Staff Member

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    The main "insurance" is called due diligence on the tenant ;)
    Do it as if you were buying the business.

    The Y-man
     
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  5. Gockie

    Gockie Life is good ☺️ Premium Member

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    Absolutely.
     
  6. The Y-man

    The Y-man Moderator Staff Member

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    I agree you can get IO - however, my aforementioned relo's found their serviceability smashed because the lenders treat it as if it were P&I with full principal payback in 10 years time.... might have just got unlucky.

    The Y-man
     
  7. ellejay

    ellejay Well-Known Member

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    Thats not bad. I was looking overseas to avoid the double whammy of large deposit and then stamp.
     
  8. Gockie

    Gockie Life is good ☺️ Premium Member

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    I heard 80% loans are available on commercial.
     
  9. DaveM

    DaveM Well-Known Member

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    Can be on resi backed assets, generally not on commercial asset
     
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  10. ellejay

    ellejay Well-Known Member

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    Sounds a bit different to the 50-65% over 15yrs that I was quoted (was o/seas though so no stamp). More research to do :)
     
  11. larrylarry

    larrylarry Well-Known Member

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    I have thought of buying an office in wife's name and rent it to my company. Sydney CBD office is just so expensive.
     
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  12. Beano

    Beano Well-Known Member

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    And
    No land tax
     
  13. ellejay

    ellejay Well-Known Member

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    Exactly. Linda is looking for cash flow and looking at high yield commercial but there's no point in forgetting about the buying costs (unless you have cash up front for this, in which case fine). Also, I can only go on my own research but you need to pay off the debt asap or have a large buffer due to the risk of vacancy and higher repayments. So the cash flow isn't going to be there in the short to medium term for everyone who buys commercial. Depends on your cash position obviously, I think. Trying not to sound pessimistic, and I'm not saying it's not a good option but if you're thinking it's going to put cash in your pocket then I'm not so sure. Very happy to be proven incorrect :)
     
  14. 2FAST4U

    2FAST4U Well-Known Member

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    http://www.theaustralian.com.au/bus...s/news-story/c36dda5d63e436cb507de85e38cdae9b

    Sydney and Melbourne’s office markets continued their strong performances during the June quarter while resources-hampered cities struggled, leading to a widening gulf between the cities.

    At the better end is Sydney with only 7.1 per cent of city office towers empty, compared with Perth, where 24.6 per cent of the CBD buildings are vacant.

    “The current spread (17.5 percentage points) is unprecedented and accurately reflects the divergence across CBD office markets,” according to JLL head of strategic research, Andrew Ballantyne.

    The increasing chasm in vacancy rates between the capital cities was going against the long term trend, Mr Ballantyne noted.

    Sydney saw 33,300sq m of office space taken up in the three months to June with net absorption running at 119,100 for the half as businesses in financial and professional services and the technology sector led the expansion.

    “Over the past few months we have started to see the impact of tenant displacement from the compulsory acquisition of assets for the Sydney Metro project and the conversion of office assets on the Sydney CBD leasing market,” according to JLL head of leasing Tim O’Connor.

    “However, only a small fraction of these tenants have committed to new premises and displacement will generate new leasing inquiry over the 2016-17 financial year.”

    The city’s vacancy rate rose slightly as space came back on to the market after tenants moved into new developments.

    Sydney’s prime gross effective rents increased 2.1 per cent for the quarter and 12.2 per cent for the year to June.

    Melbourne’s vacancy rate fell from 9.2 per cent in the first quarter to 8 per cent in the three months to June with 137,500sq m of CBD offices taken up over the half.

    The city had lagged the rent recovery in Sydney. However, a hiatus in projects being completed and lessening options for tenants may see better rental growth over the second half of the year and into next, Mr O’Connor said.

    JLL said five of the six central business districts it monitors recorded positive net absorption over the year to June including the challenged Brisbane market. In Brisbane, net absorption of 27,400 for the quarter — take up was 46,900 for the full financial year — saw the level of empty office space fall to 16.6 per cent.

    The Queensland economy was past its trough with Brisbane’s comparatively low house prices prompting interstate migration, Mr Ballantyne said.

    Canberra’s vacancy rate fell to 13.2 per cent in June, while prime gross effective rents increased 2.5 per cent. Adelaide also saw its vacancy rate improve to 16.2 per cent.

    Central business district office markets should continue to improve as development activity peaked in most markets this year and older office stock was withdrawn from the market, Mr O’Connor said.
     
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  15. Gockie

    Gockie Life is good ☺️ Premium Member

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    Still very high vacancies.
     
  16. balwoges

    balwoges Well-Known Member

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    Sold our commercial property last year, consisted of 12 small industrial units on one parcel of land, it was fully leased and bought by SMSF fund after 3 weeks of being on the market.
    It was tough going for a few years but gradually built up and was never vacant - usually could count on at least 9-10 leased units. Tenants were a mixed bunch of tradies.
    Dont know whether it would be a good business plan these days, but it worked for us. We had the property for over 20 years.
     
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  17. Beano

    Beano Well-Known Member

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    That is correct ...by the time you pay the taxes and principal there is little left over
    But it is all worthwhile as the debt is being paid off
     
  18. Shady

    Shady Well-Known Member

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    It's easy as pie to buy commercial property, it's just doesn't sell papers or make for good TV.
    Don't be put off, it's not hard to get you're head around.
    Some don't understand the share market and are always referring to what happens when the stock market crashes, some don't understand investing in residential property and talk about bubbles, some don't understand commercial property...
    If you want to see some advertising, check The Australian on a Thursday, www.realcommercial.com.au or get on agents mailing lists, they're all too happy to send stuff through.
     
  19. Perthguy

    Perthguy Well-Known Member

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  20. wombat777

    wombat777 Well-Known Member

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    Perhaps one option to consider, if you can find a site that suits it is mixed resi / commercial. i.e. Some commercial spaces under a multi-unit development.

    The commercial spaces would hopefully be a way to boost yield and cashflow if holding the development. It may also boost end-value of the property as well.

    I'm thinking hipster cafes/barbers or some such thing.

    Apparently your planning costs go up because of the mixed use and the assessment is more complicated. I believe two assessments would be required, although I most definitely lack knowledge / experience in this area.