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  1. #11
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    716

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    Quote Originally Posted by Purple Property View Post
    I went to a property investor association meeting last night about commercial property and the benefits as well as the downsides of it all.

    I've hence spent around 2 hours on trademe looking for all sorts of commercial property around the 300k-1million purchase price mark and what value you can get for money.

    Looks like you can get 9-11% yield in smaller towns, hard to re-let, short lease properties all the way down to 5-6% yield stronger tenants, stronger lease, easier to re-let properties.

    I then looked at what you can buy in blocks of units/flats for similar prices and you can buy anywhere from 2x2 bedroom units to 6x1 bedroom unit blocks with yields around the 6-7% mark in large-ish towns/cities around NZ.

    Question is... Why take the risk of commercial property with potentially vacant buildings, complexities with lending, etc when I could go out and buy a good value unit block I can add value to in a good location for similar yields with arguably better upside for capital growth longer term?
    1: Like for like (location) the net yield for commercial is mostly double residential ( i sampled areas where my commercial are ) ...
    2: WIth vacancies you will find the many odd weeks of residential vacancies similar to commercial vacancies. (Based on my commercial properties experiance)
    3: Dollar rental vs dollar rental your commercial portfolio id substantially easier to handle so net profit per hour of work is substantially more for commercial. (I would spend 100 more time on my $310pw residential tenancy than my $1m+ pa tenant)
    4: in the past residential CG has been better but i cannot see residential continue forever outstripping commercial or you will get silly result in a 100yrs where a your 61br block is worth more than westfields ...some day the growth will be similar.
    5: looking on trade me only shows what the vendor wants not what the property actually sold for (meetup with a few of the pt investors or valuers or read the actual sales)
    6: Have you adjusted the residential yield by the 10 yr refurb ...carpets , repaint, appliance replacements etc?
    7: generally commercial management is paid by the tenant residential by the landlord
    8:commercial finance is little different both in complexity and rate from residential
    9:fitout and many fixtures in commercial can be depreciated that are not allowable for residential
    10: the gst of expenses can claimed but not in residential
    11: you can operate your commercial portfolio whilst living overseas but not a residential
    12:Free to negotiate virtually any terms with the tenant eg like charging a year rental in advance
    13: transfer liability of expenses to tenant eg the tenant supplies their own carpet , stove etc.
    14:commercial tenants often spend a substantial amount for their premise (i have had commercial tenants spend $40m on their premise with residential it would be unusual for them to spend $1k)

  2. #12
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    8,112

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    Beano, I was quoted around 5.5% for commercial finance the other day.

    I was expecting it to be similar to residential at around 4.2% or so.

    You say above the rates are similar. May I ask what you're paying for new loans in the Commercial/Industrial arena?
    Squadly dinky do!

  3. #13

    Default

    I think he meant "a little different"

  4. #14
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    716

    Default

    Quote Originally Posted by Davo36 View Post
    Beano, I was quoted around 5.5% for commercial finance the other day.

    I was expecting it to be similar to residential at around 4.2% or so.

    You say above the rates are similar. May I ask what you're paying for new loans in the Commercial/Industrial arena?
    Here is a block of residential units https://harcourts.co.nz/Property/862...7-Wynyard-Road
    the asking price is $7m so the net yield will be about 2.8pc
    Commercial is a generally a lot higher
    Commercial floating is 4.28% BNZ
    The best I have seen currently is 3.71% through HSBC

  5. #15

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    That property looks like a way to bleed money all over the footpath...
    Free online Property Investment Course from iFindProperty, a residential investment property agency.

  6. #16
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    716

    Default

    Quote Originally Posted by Nick G View Post
    That property looks like a way to bleed money all over the footpath...
    Perhaps
    I thought at a price of $2.5m it would be worth looking at :-)


 

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