Commercial Property + Business owners

**Dazza** · 14-10-2007, 04:28 PM

Hi there,

Anyone own any commerical properties?

I am thinking of possibly buying a commerical property, in which the tenant is a relative. This will be my first investment outside of shares and into the property scene.

Am just thinking how much rent does one charge, is it based on revenue sales ?

currently their is potential for increases to rent, but i do not know how much i can increase it to.

its not in a mall, rather a strip of commercial buildings, near by shops are dairies/indian restuarant/salon etc etc. The building is quite old i would say, easily 15-20 years.

The business is stable and the tenants has been there for 10 years, in which they have only had one yes i say one rise in rent.

My dad was saying investors buys the propery for the yeild, not for the caps gains.

So we were thinking if we can pump the rent up realistically then the cap gain i would gain from this would be awesome

Regards,
Dazza.

Ps. i know malls charge rent on a square metre and also on a % of sales revenue.

Turnover of the business is probably around 200k + .

Does anyone know compartively how much of commerical rent is a % of sales revenue?

**STRAT** · 15-10-2007, 10:30 AM

Hi Dazza,
Couple of things come to mind after reading your post.
Renting to rellies can prove problematic. They will/may see you as the rich landlord and may expect special treatment although this is more common with residential. Rent may fall lower on their list of priorities than it otherwise would in hard times and they will/may be thinkin " Uncle Dazz wont throw us out on the street"
Rent value relates to the properties assets and its address, not the performance of the tenants business so check out other rents in the area.
Long term Stable tenants are a must and I assume the rellies are only one of the tenants ( its a block, right? )
Capital Gains is the cream and the property should wipe its own ar*e

**Dazza** · 15-10-2007, 11:07 AM

im only going to buy 1 of the 'sections' not the whole building lol

the rellie is very close in fact they are the ones that came up with the idea lol.

so its related to properties assets and its address thanks

i guess i need to get a valuer in eh?

**Billy Boy** · 15-10-2007, 11:46 AM

I own Com properties
Remember, weather it's a relly or not, you are entering into a business deal.
Treat it like a bizz deal.
get a valuer, find out from that valuer what a fair rental is for the purpose
you are going to use it for.
The norm is for the tenant to pay rent. gst, and opex's.
Opex's mean Rates, all insurances, maintenance, etc.,
all you have to do is keep the building water tight.
Your lawyer has a standard lease form and will set the lease up.
You say it is a section. Are you going to build on it. If so What.
If it is a purpose built building then get a demand a long lease.
There is a lot more I could go on about.
The above is just a few. Get some advice from your lawyer/accountant.
Remember, bare land returns nothing, and all (repeat all) landlords are
generally looked upon as Fat, Money hungry, Barst...ds, by tenants.
Cheers and good luck
BB

**Kees** · 15-10-2007, 11:51 AM

been in commercial property for 20 years some sugestions to help you.
1. get it valued although a valuer would look at the rent being paid at this stage and would value it accordingly
2. get a lim report
3. Do not count on capital gain you buy for % return on your money
4. I find that a auckland law society lease covers everything
5. Tenant to pay 100% of outgoings (repairs maintance etc)
Read the book by Martin hawes Secrets of investments success very good info

**STRAT** · 15-10-2007, 12:13 PM

Originally Posted by Dazza

in fact they are the ones that came up with the idea lol.

In that case they will absolutely want special treatment.

If you are only looking at one in a block Dazz, then the rent on the others is something you absolutely want to know

**STRAT** · 15-10-2007, 12:16 PM

Originally Posted by Billy Boy

You say it is a section. Are you going to build on it.

I think Dazza means one shop/apartment in an existing block

**lakedaemonian** · 15-10-2007, 06:43 PM

I own commercial property.

I use the ALS lease.

Rent + gst + opex + costs associated with producing lease + personal guarantee.

I would never buy a commercial property housing a relative or friend's business.....never......not if I valued the relationship.

Unless it's a screaming buy....I'd be much less likely to take a punt on commerical property right now...it would have to be incredibly compelling.

**Dazza** · 15-10-2007, 10:44 PM

lets just say that remember folks 10 years with only 1 rent increase

there is definately room for rent increase

obviously im not telling all about the 'relationship' i hear what u guys are saying, but trust me its good.

all im wondering is how much i can realistically increase the rent

it seems that i have to go get a valuer to do that, instead of say a % of the retail sales.

and yes its ONE SHOP that im buying not the building hehe.

i heard from somewhere that with commercial rents, its neva falls? it either just stays flat or it just increases correct?

also ps its a screaming buy