Rate a Property Thread.

Commercial investing is quite daunting to those wanting to making the step up from resi.

As an educational tool, it would be great if some of the pros on this forum could help out with some advice and feedback on potential deals.

It would make a good reference for others wanting to make the move to commercial in future if they can read through some past case studies of the good and bad with certain properties.

Thanks

 

241 Princes Highway, Bulli, NSW 2516 - Retail for Sale #501774014 - realcommercial.com.au

Long lease with good tenant.
Don't know how much it will go for at auction.
However, as a long term investment for cashflow, are there any clear risks with this property?

 

Single tenant

 

What's the FSR? Site appears to be underdeveloped compared to the nearby properties.
Will probably go for around 5%, possibly tighter yield due to largely underutilised land.
S149 Certificate will reveal if there is any mixed use potential (still within commuter distance to Sydney) & very close to station & on highway.
Without the s149& lease information is too scant to form an opinion.

 

Zoned B2. Retail street front with resi upstairs allowed.

 

I'm looking for my first commercial at the moment, this is way out of my price range though

Haven't pulled the trigger yet but I can say what I would do next on this.

I would ask the agent to contact you if it doesn't sell at Auction, rather than going to auction, so that you can negotiate contract conditions. If it sells at Auction, no big deal as there's plenty more fish out there.

Not enough information is provided on the ad (like almost all comm listings). Must ask the agent:
1. Copy of the lease and Information Memorandum - can't do anything without all this info.
2. What are the annual rent increases (on the lease)
3. Clarification of outgoings and who pays. Even though it says net - what is the relationship with Gross and Outgoings
4. What he *thinks* it will go for
5. Can he send you some comparable sales to back it up

Find out the area cap rate (rental yield) for similar properites and rent per sqm.
Compare them to this - does it get same rent per sqm.
If it is under-rented and has market reviews in it's lease, could be a nice buy because you may be able to increase the rent.
Buying it at todays cap rate, but increase the rent later to match the sqm rent then re-value it at the new rent (quick equity gain).
On the other hand - if it is OVER-rented, then if the price is based on cap rate you will overpay because in next market review the rent will go down, then with lower rent your next valuation will be down as well.

If the cap rate is 5%, and the quoted figure is the true passing rent, it might go for $3.2m (161,000 / 0.05).
If the cap rate is 7%,, it might go for $2.3m (161,000 / 0.07).

Probably they want to sell it at low yield due to good tenant and long long lease. But unless there are large annual increases in there I can't see how it's worth it. I would want to get the net yield above the interest rate in the first year otherwise what's the point.

Even if I had the money for this one, this one is a bit of a risk due to single tenant.
Would rather buy 3x$800k properties giving 3+ tenants, and a higher 8+ yield.

Maybe if it goes for under $2m would be good, but have to find out all of the above first.