Commercial Property

[janesco]

I've had some fun over the last couple of years with residential properties...

I think I have purchased and read everything that has been written recently on this subject. (yes Graeme I even have your book ... very interesting thank you)

I'm wondering if i should now start to branch out. (The books I've read call it diversify my portfolio) With this in mind I would like to start considering Commercial property.

Does any one have any advice on how to get started. Where I can obtain books giving the low down on the ins and outs etc. The only book I have managed to find is "How investing in commercial property really works". Is there any others any one can reccommend.

Thanks Guys

Allan S

[orion]

Hi Allan, although 'Jones on Property' is way out of date, it's still a great read if you can get a copy of it.
Also, Olly's latest book about a bubble bursting has some useful info on commercial in it, if not much else.
Apart from the one you mention, I don't know of too many more available here in NZ.

Regards
Graeme Fowler

[Marc]

Hello janesco,

Welcome to Propertytalk!

You could also browse through our bookstore and see if there are any books that might be of interest to you (most are NZ based).

http://www.propertytalk.co.nz/module...name=bookstore

Cheers

Marc

[Glenn]

Been there done that.

I spend all my time doing residential for others but invest in commercial for myself.
Much better rates of return.
but there are down sides.
I got going with a commercial warehouse. Great bit of property one tenant for the last 13 years and they want to renew for another decade.
Problem is the value of the property has not gone up like the residential ones.
Other thing is when you loose the tenant it can take 6, 12 or even more to find another tenant. Also you can only borrow 50 to 60% of the value. So the chances of growing your portfolio due to capital gains is not as good. but as I said the rent returns are better and the tenant problems generally are not at all like residential.
The other problem is the good deals used to be all above $500,000 now they are all above $1 or 2M
I am this week in the process of buying a share in a syndicate buying a $15m property. This is paying 10.25% net clear after management fees.
So this is one way of getting into the market.
Syndicates can be a problem at times and not all syndicates are equal.
But they do have a place to play in some investors portfolios.

Regards and good luck

Glenn

[kalovatt]

I have tentatively looked at getting into commercial for the aforementioned reasons as well, but to do that I would need to gut quite a few of my residentials to do so because of only being able to borrow around 60%.

Do you know of any lenders who go to 75 or even 80% at all?

[orion]

Do you know of any lenders who go to 75 or even 80% at all?

I think there are one or two that will go to 70 - 75%, but none that I know of that go to 80%.
With commercial property, you are more likely to be able to get the vendor to leave money in for you. I have only bought one commercial property so far, the vendor left in $60,000 for 1 year at 10% interest, and then the property was revalued at that time. The vendor's debt was paid out almost in full by the revaluation. It was only a $220,000 building, but was done with about $20,000 deposit or equity used, from memory.

Regards
Graeme Fowler

[RentMaster]

Re: Commercial Property

Where I can obtain books giving the low down on the ins and outs etc.

Have you looked at Property Investment - A strategy for wealth by Martin Hawes. It convers all classes of property including commercial. Martin Hawes however has a preference for commercial, so it has more than the usual information on this type of investment.

http://www.propertytalk.co.nz/module...&bookId=11

[kalovatt]

Thanks for that Graeme, very helpful.

Will keep that in mind.....

[fudosan]

Hi Allan, although 'Jones on Property' is way out of date, it's still a great read if you can get a copy of it.

I picked up a copy last year at a second-hand book fair for maybe $2, and had Bob Jones autograph it after his talk at our investor association meeting last month. I imagine this "small improvement" should allow me to fetch a much higher price one day when I want to sell it.

[orion]

Martin Hawes however has a preference for commercial, so it has more than the usual information on this type of investment.

He may have a preference to it, but does he ever invest in anything? He reminds me of Mary Holm in some ways. I think most of his income comes from selling his books, rather than any investments.

Regards
Graeme Fowler

[fudosan]

I think most of his income comes from selling his books, rather than any investments.

That's my impression too, after listening to his talk at our investor association meeting a few years ago.

[fudosan]

The Weekend Herald has a section on commercial properties and legal Q&A by Simpson Grierson.

[Glenn]

Yes I heard him once.
The only thing I remember him saying was do not buy a block of shops.
Well someone I know who was sitting beside me had just bought a block of shops just like that in an area that is not highly regarded. That owner thought the advise was stupid because he makes 15% net even when one of the shops is empty.
There is money even in muck if you know what you are doing and are prrpared to put a bit of work into it.
By the same way I have seen so called experts loose their shirts (or was it skirts) on top of the line commercial properties because they took advise from so called experts.

[orion]

Just had a thought - do you think Martin Hawes and Mary Holm are actually the same person?
They seem to have very similar investing experience, and they even have the same initials.

Regards
Graeme Fowler

[Marcus]

Just had a thought - do you think Martin Hawes and Mary Holm are actually the same person?
They seem to have very similar investing experience, and they even have the same initials.

Regards
Graeme Fowler

Now there's a thought.

I read Martins' book Property Investment in NZ a few years back now and my take on it was that he has a very conservative approach to investing (Pay off your personal Mtg, Save a deposit, buy an IP, pay mtg, save next deposit, buy IP...).

Going on his advice I would be as old as he is at present before I could start saving for my first deposit!
NO THANKS.
Where his theories may sit well with my father and many others of his generation, they fall well short of my goals and expectations.
Sorry Martin. Far too many faster (Some may argue safer) boats will have sailed in that space of time. I am not necessarily looking to sail off in a race yacht, just one that I am able to Captain (with the help of professionals, and a few friends on the same journey), knowing the "ins and outs" of, so that I can do running repairs when need be.

Regards,
Marcus.

What sort of boat/s are you sailing?