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  1. #1
    Join Date
    May 2009
    Location
    Christchurch
    Posts
    2

    Default Ideas to reach rental agreement

    I am currently in discussion with a landlord regarding moving premises (to a better site). The landlord is proposing a square metre rate which is a third more than what I am reliably informed that it should be.

    Can anyone offer ideas as to how we can help each other reach a compromise (this is mainly a retail site, and will be newly renovated)? We are prepared to pay a fair rent, and maybe even a premium if we are able to get some good ideas that the landlord might consider.

    I am thinking (and I'm unsure of tax implications) along the lines of landlord funding some of fitout, or guaranteeing rental, with no increases for a period of time. Is this realistic, or are there any other ideas?

    Thoughts please.

  2. #2
    Join Date
    May 2007
    Location
    Hamilton
    Posts
    3,674

    Default

    Hi Dazza34,

    The landlord's building will be valued based on the rent. So he/she wants this to be as high as possible.

    Say you think rent should be $50k, and agreement is $60k, for 5 years.

    - If sign at $50k, might be worth say 7.5% yield so 666,667
    - at $60k , at 7.5% = 800,000

    So extra $10k worth $130k approx to landlord, and will cost tenant $10k*5.

    One option is for the landlord to pay your a lease incentive of $50,000, which would be taxable to you. Or even more as overall there is $80k upside from the $10k extra rent, so maybe you could get the $50k that it will cost you plus half the upside, so $90k incentive?

    Ross
    Not sure where to start, book a free chat for 5-10 minutes https://cswaikato.co.nz/services-pro...s-hamilton/201
    Ross Barnett - Coombe Smith Property Accountants


  3. #3
    Join Date
    Jun 2004
    Posts
    10,614

    Default

    that sounds really unethical.
    Basically cranking up the rent.

  4. #4
    Join Date
    Jul 2011
    Location
    Tauranga
    Posts
    2,769

    Default

    Quote Originally Posted by Wayne View Post
    that sounds really unethical.
    Basically cranking up the rent.
    Which is why you must do your homework before buying- pretty there is a case going thru some legal stuff now / soon in Tauranga over the same thing (Directors got a kick back for signing large leases, rent yield appear awesome but way out of line with market - not sure what purchaser was thinking)

  5. #5

    Default

    I'd say that valuers would be aware of case law surrounding this sort of headline vs effective rental scenarios.

    If a commercial property trades with an over the odds lease in place, what happens if that tenant leaves or it goes to a non racheted rent review? Not a happy spot for the purchaser.


 

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