Should I buy a Bunnings Warehouse?

Check this article out: http://www.news.com.au/finance/mone...mercial-property/story-e6frfmdr-1227479316459

Makes you want to bang your head against a wall. Apparently a 5.1% yield is impossible in the residential market.

Anyway, it seems silly to spend $10 million on a Bunning's Warehouse for a 5.1% yield. If that place goes bankrupt or decides to relocate you're stuffed. One near me recently upgraded to a larger store; I always wonder about the landlord who owns the old one. Occupied by a car dealer now, but I doubt they would be receiving the same rent as they were.

Does anyone disagree, and think buying a Bunnings with a 5.1% yield is a good idea?

 

All depends on the lease terms.

 

You only have to look at Burgess Rawson auction results. Even sub 5% yields for bank premises etc. Crazy.

I've seen Bunnings move twice in my hometown.

pinkboy

 

With 5% yield for commercial properties, I will only buy it if it has development potential. I was looking at a retail property on Hassell St in Parramatta asking for around $2.3M back in 2012. 450sqm corner block 6% yield. I remember it has 8:1 FSR but I didn't buy it as I didn't think it can satisfy the car space requirement. The owner somehow managed to get the DA approval for 30 units and sold for $5.5M last year.

 

They seem to move frequently in my opinion; the one in Cheltenham (VIC) moved to a new site last year; Altona and Ballarat have also relocated in the last few years.

 

I'd put my 23 million dollars, then 10 million dollars elsewhere.

 

Yep, seems like the doctor's got more dollars than sense.

 

.

LPTs often sell below MTA as they're not fully understood by the market.

I saw a syndicate for a commercial building in Parramatta yesterday - 8% yield. Possibly ok for a SMSF as a medium term holding but no exit strategy for 5 yrs.

 

If you had $10M, would it really matter whether you'd get $510k pa or $750k pa?
both are still way more than I could spend. Plus Bunnings would probably make for an easy tenant.

 

That Bunnings store in Swan Hill is relatively small the smallest I have seen has less product range, has very narrow aisles, limited parking and no room for expansion, I would expect in 10 years when the lease expires they will be looking for a larger site.

 

Steve McKnight talks about using value add to residential property, like renos, sub-dividing, development to increase your funds and then eventually moving into commercial property. Why bother if you're getting as good or better return on your residential properties?
The good doctor should know that commercial property value/yield is different to residential property.

 

Why bother? Maybe because he wants an easier investment. Imagine how many propertiirs youd need to have to get 500k a year in rent if they were each paying 500/week. What a bloody nightmare

The yields here certainly seem low but ultimately this guy is collecting well over $1m a year passively from a very strong tenant, he likely and probably justifiably doesnt give a damn what any of us think

 

Meow! Skipped brekkie sanj?

 

Not at all, i did include myself jn the group of people whose opinions dont matter to the buyer.

He owns over $30m of property, get morerent than he can spend and lrobably spends as much time on it as someone who owns 1 or 2 resi properties.

 

Sure, he's rolling it in. But as a percentage it's not great, I'd be wanting to be doing better than a return of 5% on $30m.

 

So would i but it all depends on your age, goals and what else your portfolio is doing.

As it grows bigger and bigger youre likely to accept lower yields with less risk as theres already way more being generated than youd need.

 

But if you were worried about the risk, you could just put it in the bank and live off the... oops, wrong decade

 

Actually, it's not that bad.
Less than 10 minutes/week is all it takes.