Commercial property in Tauranga

[snobilo]

I am wondering why we do not hear much about commercial property in Tauranga? A lot of residential investors and families are moving their due to the increase in Auckland house prices so would commercial property not follow?

I do not have the capital to buy anything their just yet nor do I have the experience in commercial property so all opinions or links to case studies would be appreciated.

[vermin]

the yields for commercial properties in places like tauranga and hamilton have come back a lot in the last 12 months or so. not quite to auckland levels but there are sales less than 7% which is pretty sharp.

[snobilo]

Ah thank you, I've noticed it is not cheap getting into commercial either, no wonder its primarily done with syndicates.

[Beano]

Ah thank you, I've noticed it is not cheap getting into commercial either, no wonder its primarily done with syndicates.

Not necessarily. I have purchased carparks for $25k

[snobilo]

What return do you get on those and where abouts? I've only really seen carparks in Auckland and they go for around $100k

[vermin]

the problem/difficulty with a commercial property investment is that the loan needs to be repaid over a shorter time frame - 15 years and max LVR of 60%. and the interest is circa 1% higher than a residential loan. this means making an investment with limited cash deposit hard to stack up. Also the vacancy risk is higher and reletting costs (agent fees and incentives) can be very expensive.

the upside is the returns can be really good compared to residential. plenty of mum and dad investors buy commercial property especially sub $2M range. still properties returning circa 8% net yields if you hunt around.

If you have plenty of equity in residential property you can leverage this to buy commercial property on residential loan terms. That is how i first got into a commercial property.

[Beano]

These are wgton
Return was 5.9pc but has dropped since the bc fees have risen

[Beano]

the problem/difficulty with a commercial property investment is that the loan needs to be repaid over a shorter time frame - 15 years and max LVR of 60%. and the interest is circa 1% higher than a residential loan. this means making an investment with limited cash deposit hard to stack up. Also the vacancy risk is higher and reletting costs (agent fees and incentives) can be very expensive.

the upside is the returns can be really good compared to residential. plenty of mum and dad investors buy commercial property especially sub $2M range. still properties returning circa 8% net yields if you hunt around.

If you have plenty of equity in residential property you can leverage this to buy commercial property on residential loan terms. That is how i first got into a commercial property.

Not true commercial interest rates are generally lower than residential

Fixed interest rate is about .2pc less on commrercial (4.1pc 1yr fixed)

Floating about 1pc less (4pc)

[vermin]

Not true commercial interest rates are generally lower than residential

Fixed interest rate is about .2pc less on commrercial (4.1pc 1yr fixed)

Floating about 1pc less (4pc)

Who do you bank with and have you ever borrowed to buy a commercial property?

I bank with one of the main Aussie banks and their commercial property loans are more expensive the residential because the risk is higher.

I think you are wrong.

[Beano]

Who do you bank with and have you ever borrowed to buy a commercial property?

I bank with one of the main Aussie banks and their commercial property loans are more expensive the residential because the risk is higher.

I think you are wrong.

Bank with Asb westpac and bnz
All three have similar rates
All commercial rates are similar to residential
Been borrowing and buying commercial for 22 years now

[snobilo]

Has anybody got any advice on the Tauriko business park in Tauranga? I see it advertised everywhere and has been for awhile, is it not selling?

[Stickman]

As a little bit of an aside...

We recently started a Tauranga division of one business that we own. My preference is always to own the properties that we operate out of and so begun the task of finding something in and around Tauranga. After a couple of days of searching I realised that pickings are slim in the Commercial/Industrial sector and you do not seem to get a lot for your money. (Some deals seem to be had on leasehold land...not interested. Only want freehold.

After becoming frustrated, I started to think outside of the square and ended up with a result that I am much more pleased about. For the same amount of money ($780k) that I was going to pay for a run down industrial unit on body corp shared land I was able to buy a rural property with a lovely 3 bedroom house and industrial shed sitting on 16 acres and only 12 mins from town. Much more liquid asset IMO and the value for money is leaps and bounds ahead of what we would have got out of an industrial building.

I was in a meeting with the CEO of Priority One (a local economic development organisation for those not familiar) and it was extremely interesting to hear about the levels of investment being made by property developers into the Tauranga/Western Bay region. Pair this with the development of the rail corridor to connect with the inland port in Hamilton and the boom in the residential market and one has to surmise that it should be a focal point.

I am very interested in the region and will be actively looking to purchase again.

[Joshua Fong]

Beano, do you know a good commercial loan broker to recommend? Am keen to get started soon.

[Beano]

Beano, do you know a good commercial loan broker to recommend? Am keen to get started soon.

Sorry I can't as I go direct to the banks
All I know is that floating commercial Interest rate is about 1pc less than residential
But not always been like this
Only for the last twenty years
But just be aware principal payments are pretty tough and you may well be forced to repay more than 100pc of your net cash flow (rent less expenses less tax less capX plus/minor working capital = net cashflow
But on the other side of the coin the profit will rise substantially

[Joshua Fong]

Thanks. I had assumed that I could take interest only loans for commercial as well.