What can u buy for 1 million in commercial and for what returns or secure income

Discussion in 'Commercial Property' started by justine77, 23rd Sep, 2015.

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  1. DanW

    DanW Well-Known Member

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    No the distribution is based on the value of your units. Units being $1 each on day1. So on 100k you would get $9500 per annum. About $800 per month.

    They might be earning 7% yield or something but due to leverage you get between 9-15%. They also hold back alot of the rent to cover future vacancies, so your distribution is more stable.

    Due to increasing rent each year see the older ones the distribution increased.

    To get out is not easy as it's unlisted. There are ways to sell to other unit holders, but usually best to wait until end of life. Read each product detail.
     
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  2. Elives

    Elives Well-Known Member

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    How does tax work with these payments? etc franking credits. :s

    you get 9,500 with franking credits? or is that net?

    also did you end up figuring out a way around the new serviceability changes? for resi property
     
  3. The Y-man

    The Y-man Moderator Staff Member

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    For unlisted and unstapled, they are treated the same as if you owned the property - it is net of PM fees, etc, Youmay be able to claim on depreciation etc. The manager will send you an annual tax statement.

    The Y-man
     
  4. Elives

    Elives Well-Known Member

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    i know nothing about how shares / how these types of arrangements work, just to clarify so on the 9.5k you would still have to pay tax or not? :S also with this income how do banks look at it? do they only take into account 80% of the income?
     
  5. Daniel007

    Daniel007 Well-Known Member

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    Saw one of the trusts had a minimum 10k initial investment, is this the same industry wide or does it vary from trust to trust.
     
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  6. The Y-man

    The Y-man Moderator Staff Member

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    Varies, but $10k is common.

    The Y-man
     
  7. The Y-man

    The Y-man Moderator Staff Member

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    Yes - it would be the same if you and some friends jointly owned an investment property. You still need to declare the income you receive for your share of the rent, less property management fees, maintenance, repairs etc.

    As for banks - broker to advise....

    The Y-man
     
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  8. DanW

    DanW Well-Known Member

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    Varies.
    Some are $100k
     
  9. DanW

    DanW Well-Known Member

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    Buying high yield doesn't help that much I found . I'm asking my boss for a pay rise and promotion :)

    Also there are still some non bank lenders that have fairly good servicing, a broker can help with that. There's a few threads on it
     
  10. Elives

    Elives Well-Known Member

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    if you buy into one of these commercial projects. do you get contact details of the other investors? so you can buy / sell units? i would think you could get a discount doing this as there wouldn't be to many buyers.
     
  11. DanW

    DanW Well-Known Member

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    I asked how selling units is done and it's like:
    1. Your units are offered to other unit holders only in the same trust/property first via email list and they have a period of time to respond to be the first buyers
    2. If they weren't taken, they would be offered to investors from other trusts and general mailing list
    BUT - they also said that it almost never happens, since the returns are so good.. But that's sales for you :)

    If you think there's any chance you might want to sell, I would say this is not the right investment. Listed property trusts are much easier.
     
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  12. blw101

    blw101 Member

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    Some really good points all through here, might be worth re-naming to "unlisted property trusts/syndicates".

    To summarise from my POV, key points are:
    - Assets are typically smaller, more secondary assets vs the large REITS (to not compete for acquisitions)
    - This tends to mean they are higher yielding, but this is generally because the property quality is relatively inferior and even if there is a secure income profile (eg long 5-10yr lease), there may be substantial re-leasing risk on expiry.
    - Smaller funds are typically closed ended (say 5-10 years) with rollover/extension provisions but difficult to cash out during an initial term. There are a couple of larger, open ended products though (Charter Hall, Australian Unity and AMP)
    - Management fees can be material, typically there will be:
    - a base fee of 0.6%-1% of gross asset value per annum
    - acquisition and disposal fees (1-2% of purchase/sale price)
    - expense recovery (trust annual audit costs, property valuations etc) say 0.1 - 0.2% of gross assets per annum.
    - a performance fee if the fund hits certain return hurdles over its life (measured after all other fees have been deducted).
    - As has been mentioned, unlisted retail funds have typically higher leverage, particularly if underpinned by secure income, 40-50% is common. This helps overcome the management fees to achieve the typically well proclaimed distribution yield!

    In short I would say, like any property investment, the quality of the underlying real estate is key.

    Cheers,
    BLW
     
  13. mrdobalina

    mrdobalina Well-Known Member

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    I have a mate who lost about $1m during the GFC investing in a property trust syndicate. The trust used short term finance, GFC hit, then couldn't get it refinanced to finish the renovation of the cbd office building. Lost the lot.
     
  14. DanW

    DanW Well-Known Member

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    Yeah this is what I'm talking about.

    Even some listed trusts lost 90% of their value and had limited recovery during GFC. And if you bought them on margin loan and debt on debt then you were even more screwed.

    Definitely need to diversify the risk down.
     
  15. chindonly

    chindonly Well-Known Member

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    As these are unit trusts, the taxation implications flow onto the unitholder? i.e. No tax is paid within the trust?

    That's how it works in a charitable trust we have via work.
     
  16. DanW

    DanW Well-Known Member

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    You need to talk to your accountant but there can also be positive tax effects.

    Depreciation and deductions off the income.
    Possibility reduction in cost base from additional deductions.

    Yes it may be a positive geared investment but so are shares with franking credits.

    Also you can borrow the money against other property to buy the units to further improve tax position but of course this amplifies the risk.

    Also the Y-man has an applicable answer above too.
     
  17. Omnidragon

    Omnidragon Well-Known Member

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    Not sure - an outer suburb little shop?