Join Australia's most dynamic and respected property investment community

Trouble Free Investments

Discussion in 'Commercial Property' started by Beano, 27th May, 2016.

Tags:
  1. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    420
    Location:
    Brisbane
    Interesting comment from Ken Woodley (Metro Property co-founder)
    "with shopping centres you're dealing with multiple businesses and co-ordinating a number of tenants" Mr Woodley said. "But I'm only dealing with one company for each of them. It's absolutely trouble free"
    His Net yield range is 5.75% to 7% over his three Service Stations (Virginia, Holland Park and Sherwood Court)
    This one has a 15 year lease with all outgoings except Land Tax

    ps I see his point . I spend more time on my tenants paying me $50pw than the one paying me $1m a pa!
     
    cheekykoon likes this.
  2. Luke T

    Luke T Well-Known Member

    Joined:
    12th Dec, 2015
    Posts:
    164
    Location:
    Sydney
    Is totally true Beano -works well most of the time!
    -until the unlikely event the big tenant tries to get out of the lease early or something.

    I have a close friend who leased to caltex for 20 years ,but when they left ,
    it came out that they hadnt honored the lease (as they were supossed to have the tanks checked/maintained for leaching etc but never did.)
    -The neighbors complained as there was petrol in his dam -and the fun began!
    The big players have the resources to keep stretching out the small players
    - subsequeantly my friend settled and demolished the servo.
     
  3. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Adelaide, SA
    Lenders generally find petrol stations as poor quality security and will either not lend to them at all, or at greatly reduced terms.

    The main reasons behind this are the EPA issues, specialised security with limit other uses for lease and the large consistent decline in the number of petrol stations over the last three decades. (there are lots of empty and now demolished petrol station sites which cost too much to be re-mediated to alternative use)
     
    charttv likes this.
  4. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    420
    Location:
    Brisbane
    Good point Luke
    I will make sure my tenant honours the lease (and enforce the maintenance of the building if need be) to avoid having a derelict building left on my site in the event the lease is not renewed.
     
    Luke T likes this.
  5. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    694
    Location:
    Sydney
    Is "net yield" after interest or not? If not, doesn't sound that impressive.
     
  6. Luke T

    Luke T Well-Known Member

    Joined:
    12th Dec, 2015
    Posts:
    164
    Location:
    Sydney
    Hi Spludgey ,
    Net yield is referring to the property deal itself,Not the way you finance it .
    Meaning different people will have a different interest cost on each deal,
    ;so no yr interest costs come out of the net yield.
     
  7. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    694
    Location:
    Sydney
    That's what I figured, I just thought that <6% yield was quite low for commercial IPs. This would mean that you're not making any money on the proportion that's mortgaged, as interest rates would be roughly the same, wouldn't they?
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,597
    Location:
    Sydney or NSW or Australia
    <6% implies less risk or overpriced - I have seen buildings sell below 3% to mum and dad investors with $ in their super funds.
     
  9. Luke T

    Luke T Well-Known Member

    Joined:
    12th Dec, 2015
    Posts:
    164
    Location:
    Sydney
    6% is close to interest cost yes,but as scott said some people have different strategys to invest .
     
  10. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Adelaide, SA
    Initially. But if the yield is that low, the market is clearly rating it at a low risk and inferring the vacancy risk is low - so growth of rents will create cash flow.

    No different to all the large swathes of negatively geared properties which yield <4% gross.
     
  11. Omnidragon

    Omnidragon Well-Known Member

    Joined:
    17th Oct, 2015
    Posts:
    414
    Location:
    Victoria
    You're trying to get your tenant to pay $50/week because you put down $250k.

    He's getting his tenants to pay $1m/week because he put down $1bn.