Newbie looking to purchase

[Keys]

Hey there.

Anybody experienced in commercial interested in assisting a commercial newbie (me) with a potential purchase?

First foray into the system and I know it is totally different to residential.

PS. My intent is to purchase, my request is for knowledge.

[Davo36]

Sure, happy to help if I can.

[Ivan McIntosh]

Feel free to give me a call Keys, regarding legal aspects...my shout.

[props4u]

Feel free to give me a call Keys, regarding legal aspects...my shout.

ah ... oh ... you must like him more than me ... sobbing

[Ivan McIntosh]

Oh I like you fine, you drama queen Go on then, give me a call...it's on me

[Rosco]

- commercial property is all about the Tenant. If tenant goes bust or moves, then landlord can be stuck with an empty commercial building for some time, or be looking at a large refitout cost.
- chattels depreciation is better on commercial. Can still depreciate fitout (partitions etc)
- a great trick in commercial is to buy empty, move your own business in, then value goes up around 1.5 times if done right. Ie buy for $100,000, then worth $150,000 with tenant
- borrowing obviously les, and around 65% of purchase price. Westpac were offering 100% of owner occupier building.
- GST registered normally, so watch how you state GST on the sale and purchase agreement, especially with compulsory zero rating.
- watch for earthquake work needed, as can b very expensive

Hopefully that gives you a few things to consider

Ross

[imd6662]

Keys read my mind.: was thinking about asking much the same question.

Am familiar with commercial leases, having signed a few, and with some of things Ross mentions about risk etc. but some of those other viery brief comments are helpful. Can you clarify the GST thing little more, especially "compulsory zero rating". I see that properties are sometimes advertised as +GST if applicable which presumably depends on the GST registration status of the purchasing entity.

Any particular throughts/tips about dual-use properties (ie office/warehouse + associated dwelling unit?

[Ivan McIntosh]

It does depend on GST registration yes, in simple terms both parties need to be registered before the deal goes unconditional.

Zero-rating only works in situations where historically the purchaser would have to pay GST, the vendor would then pay it to the IRD, and the purchaser who paid it in the first place would then claim it straight back. Essentially that was a pointless administrative waste of time for the IRD to collect it and hand it straight back, as well as a nuisance for the purchaser who has to get bridging finance to cover it in between payment and reimbursement. So, finally, common sense prevailed and a sale and purchase under those circumstances is zero rated.

If the purchaser isn't registered, then GST needs to be collected and paid by the vendor...because the purchaser isn't going to be claiming it back from the IRD (leaving aside later registering and claiming a credit).

[imd6662]

Ah... so GST-registered vehicle is a pretty good idea then.

[Keys]

Hi all.

Thanks for your comments. Ivan, I might call at some stage regarding the lease for new tenancies.

Regarding GST. This is a zero rated transaction as vendor and purchaser are GST registered.

The building is a single story, double brick unit with no insurance so there is an element of risk there. I am making enquiries at the moment regarding the possibility of compulsary earthquake strengthening as that may make the purchase uneconomic.

It is large enough to seperate into two offices with a common meet and greet area so that is something to think about. Having withstood all of our earthquakes I'm considering putting a domestic sprinkler into it to take care of the fire risk.

[CJProperty]

Should you require information about you potential property I.e.% NBS building reports etc

Feel free to call me 0275165430

Cheers Jason

[JBM]

Also looking at buying my first Commercial property in the deep south ...very good numbers but has a NBS of 27% so earthquake prone and as we know needs to lifted to 34% min within 10-15yrs ....now it has insurance but I do wonder if the provider knows of the lower NBS ...

Anyone own a similar 1960-70 brick two story commercial property with a 27% NBS ? any idea on costs to bring up to 34%

[Nick G]

What's the cost of getting an engineers report? Was quite reasonable on a residential 3-level place we sold in Wellington recently.

[JBM]

What's the cost of getting an engineers report? Was quite reasonable on a residential 3-level place we sold in Wellington recently.

So how much did it cost you ..also what do you believe you have to do and spend to get the NBS up to standard ?

[Halfway To Paradise]

I am looking at buying two commercial properties listed by the same seller. I have no problem valuing one of them using rate of return I want. The question I have is on the 2nd property which has 1 lease for 40% of the floor space returning $12,000 net per annum, this is on a 7yr lease consisting 3x2x2 currently over 2 years of the first 3yr term. The 2nd part of the property which is 60% of the property is on a month by moth agreement returning only $5,500 net after landlord has paid outgoings. I am looking a wanting a 10% return and so value the property at about $175,000. However as of 2014 the GV was $377k with the land value portion being $127k. the reality is this will have gone up this year by about 25%. While I see my required return valuing the property at $175k it is clear this would not be accepted due to GV. Is there a formula for coming up with a value taking into consideration the required return and the GV.
Thanks
Robert