Sydney yields?

What are typical yields these days for CIP in Sydney? Specifically office suites and also ground floor shopfronts?

Thinking of buying one this year, either a shopfront or office suite with the intention to owner occupy but the deal needs to make sense on its own as well (i.e. if we didn't have a business to occupy it).

Also I'm interested in a CIP buyers agent if someone knows an expert send them my way thanks

 

Ground floor shopfronts are normally 5% when purchase, 4% increases in rent every year. Once the lease contract terminated, then it is the time for massive amount of rent increase but depends on how much demand your shop has.

Some shop down at Haymarket, the rental yield could go as low as 3-3.5%, you are lucky/resourceful if you can even secure one, as shop there is as rare as hen's teeth.

I personally have no interest in office suites, and do not know any CIP buyers agent. I'm not a strong believer in buyers agent, but I do believe on commercialrealestate.com.au and realcommercial.com.au.

 

mine are doing 6% net after cost. tenants pay all out goings.

office would be bad choice if u ask me.. too many and zero competitive advantage (as a unit lot)

 

was it 6% net after cost when you purchased it, or you have hold on it for a bit of time?

 

at purchase.. one of my requirement for me its that it has to be 6% net after all cost.

 

Don't mind I ask the reason behind it? For me I am happy to see a bit lower if the prospect of the shop can increase in yield massively once the current lease contract finishes.

 

to be honest, no such thing as massive increase in yield unless something of significance happen in that area. and as u know is normal for a commercial lease to go from 5 + 5 or 10 + 10. 10 years or 20 years of lost income. your not gonna break even suddenly just because you gain few % a year.

here are some reason behind my thinking of needing a minimum of 6% return
6% is just a personal target thing i need my money to grow. NO real financial or scientific reason behind it.

inflation avg around 3% a year

interest rate is again another 3-4%

if your property or investment is returning anything less than 6%. your earning either zero not earning money.. whats the point of investment if your not earning.

also issue of opportunity cost. stock market returns 5% franked dividend + capital appreciation if just simply buy a bank or blue chip like COH/CSL.

 

inflation is an advantage if you are funding with finance, it reduces in real terms the cost of purchase and payments.

 

How many people get CPI vs CPI+ rental increase year on year?

 

I am not sure if I entire agree on your opinion, yes, you are right on the part of we are looking for significance change in the area/even potential change in the shop usage. A simple example could be a shop that is current a florist may be able to turn into a cafe and where there is a more demand for cafe business rather than a florist. Ofc, looking into the potential and doing all the due diligence is the hard yard we need to do in order to achieve the increase we are looking for.

A lease can ofc go for 10 + 10, but I am not suggesting to go for a 10 + 10 that just started its 1st term, but look for something that almost finish the 1st term say 3 years to go, and you can do market review after the 1st term (provided the exist lease contract have the market review clause).

I am not sure if any owner will sell their commercial property to the next guy where there is more than 6% ROI, where there still a 20 yrs lease, and they know even after the 20 yrs lease they will be leasing it on par with market rate and short vacancy period. Except the owner is needing the cash/the deal is massive where his/her already made massive $ from capital appreciation.

I have seen a lot of commercial properties that are having more than 6% ROI but you can foresee there is a long vacancy period once the current lease contract terminates.

In regards to buying share is better, I am also not sure if thats correct, I have never seen an financial institution that lend money for share that is on par with mortgages. we are talking about say 15yrs P+I 70%lvr on say 4.6%, not a stock market margin loan that are IR=10%, LVR 50% with loan term 1-2 yrs.

 

Commercial rate at 4.6% is great.. Commonwealth's is about 5.8%_5.9%

 

Anyone with a CIP gets it (or CPI + % or fixed increase or a % or turnover etc), all without asking or providing 60 days notice.

 

Try ANZ or IMB.

 

WOW such great info here, thanks.

I need to get started on this soon...

Yes I agree office units are a bad choice generally - there's no cap on supply. I like ground floor shops.

I still feel like I need a BA - a service fee of say 10-20k to buy the right knowledge is little compared to the size of the deal. Wooster - you disagree, can you elaborate on why? I'm just concerned about the old saying 'you dont know what you dont know' so if I attempt to find my own deals, I might step on a landmine even after careful DD.

 

I have never used any BA, so, my reply was purely my 2 cents.

For doing DD, you pay 10-20K to a BA? for them to teach you the DD they have done? wouldn't engage an experienced architect for a consultation fee be cheaper?
Keep in mind a BA does not guarantee your DA that you are trying to apply will go through, where as an architect or those consultancy firm that does DA for you have experience on doing the DA and can show they have done DA with similar situation.

I will pay a BA 10-20K if they can find me a shop in a great location that is way below market value, ofc only paying them after the deal is done.
Like an off market deal, but I am not sure if those deal exists often. Most of the owner that owns a great location would like to go to market using an agent that ad online?or doing an open auction right? even if they need cash badly but if they sell their shop say 10-15% cheaper than the market value, anyone will buy it right away. You can say that's exactly the BA you need that knows the owners that needs $ badly, but that's purely timing, not so much the skill of a BA.

You can also say some BA may be able to get you asset that the owner wouldn't want to sell. The best example is those BA that works in Burgundy France, where they work with those rich family which owns Grand Cru lands, you can of course work with those BA and actually can only work with those BA, but those land wont be cheap.
In our case could be something like a retail shop right at say victoria ave in chatswood, or burwood road in burwood. Having said that, you dont need a BA to buy those shops, you can find it on commericalrealestate.com.au.

I am very hesitate to pay someone any $ that there is no guarantee, their service may not entirely just serving your interest. How did you know a BA isn't a SA at the same time for the same deal?
I am also not a person that like to be influence by the other on an investment decision, I like to use my guts to feel the vibe of the area. Not to mention the enjoyment it brings if the place you purchased do go big time in say 2-5 years.

 

Trying to find out what exactly does the law say? dont mind giving more in depth example? or explanations? Is there any grey area that law doesnt protect?

 

system is wrong here imho.

should be like other countries where the commission for a sale of asset is split into buyer and sellers. selling agent focus on listing and selling (marketing and presenting and dealing with buyer agent or qualified buyers(by referal only) and buyer agent focus on finding the right property at the right price, makes the process so much more streamline and easier, and both agents do the negotiation.

no need for the buyers to line up 10 property on a weekend and rush through every single on of them and go through the property with 100 other groups doing the same thing, makes viewing property much better experience as you are the only one in the property. (when you watch location location location) that should be the buying experience, find this impossible to achieve in Australia, but in uk us and sea, this is generally the experience i achieved/received

buyer agent in aus only useful if your above certain networth looking for properties above XXm value

most sale over 10m you wont see on the "auction" report on the weekend. while depending on how private the seller and buyer is, they will/wont advertise.. just look at Christie international website for (australia aka ken jacobs), doubt many will be advertise on domain/real estate if the value of asset is above x amount value + high profile buyer/seller.

i get it some people like to go through properties and do things on their own, just like shares, but from the general public, just let the "proffesionals" deal with it and you get on with your lives.

agency and sale agreement ?? its called duty of disclosure ?? section 47 (i think quickly google fair trading)
most sale agent in Australia is needs to be a buyers agent anyway, they keep a data base of "buyers" just without signing a buyers agent agreement and get no fee for it...so technically the selling agent technically finds the buyer anyway.

 

I agree that for deal that is 10M+ a BA could be easier at securing a site, especially, some that you need to lure them to sell. Also, if you can afford 10M+ or even 100M+ you most likely have a team behind you. e.g. legal, agents, accountants and etc. The effort would then be managing people when comes to deal this big, also impossible for 1 man to do it all.

I am also a guy that believe on DIY i.e dont involve yourself, e.g. wasting your time to renovate. What I truly believe in is you should use your time to find the best deal in the market. i.e. spending your time to read newspaper on where has potential, then drive up there and smell the hood. Talking with all agents in the areas you are interested, looking at the way they do business and see if they align with the way you do business.

some of my frds like BA is because they are not motivated to go to inspect different properties but rather spend their time enjoying themselves say doing sport which is totally understandable.

Having said that, buying the correct properties that fits into your investment strategy is critical in my opinion and I am not sure if I want to rely on other person to find that deal for me.

In terms of section 47, what I am saying is not the agent charging both the buyer and seller commission but rather charging the buyer commission but doing it as a favourite to the seller. Some commercial property can be rubbish, but in the month of a "good BA" it can appears to be a gem to non experienced investor. I was just saying it make no sense to me to pay some one 10K-20K where you can just use your own effort at finding those deal. Where as if you can affort 10M+ property you time is even more useful than finding deal, which I think at that point in time networking is what you should do.

If you want to do things right, you better do it yourself.