Commercial Property....am I missing something ?

C

chalky

Guest
I've noticed that some commercial properties are quite cheap compared to residential properties and I'm considering buying a retail unit to rent out.

Any pointers on what I need to consider compared to a residential let ?

Thanks
 
What do you mean "commercial properties are quite cheap compared to residential properties"? On what basis do you consider a particular residential and commercial property equivalent so that you come to conclusions about the relative value of each? Have you crunched the numbers, assessed the costs/benefits, worked out the yield and potential capital gain in order to evaluate the different options? Do you have any previous experience of residential and/or commercial property investment? Do you know that property investment is the most suitable option for you/your situation? Have you sought any independent, professional advice?
 
Apologies for the vagueness......

Assume that property investment is right for me, though I don't yet own an investment property.

Yields on residential property are lowish with value difficult to find in Dublin e.g

1 Bed Apt (400sq ft no parking) = 250K-ish
SD = 4% (10K)
90% Mortgage = 225K repayments c900pm
Rent pm = 800
yield = 3.8%

Example of 2 commercial properties I saw recently:

1.) Retail outlet in a market (250sq ft) to purchase for 40K or rent for 25Kpa. Presumably I could purchase it for 40K than rent it out for 25Kpa....like I said what am I missing ?

2.) Prime retail outlet in city centre (2000sq ft yes two thousand sq ft !, huge footfall) to purchase for 325K (i.e. about the price of a tiny 1 bed in d4/6), could probably rent it out for way in excess of the rent on a 1 bed apt.....again what am I missing ?
 
2.) Prime retail outlet in city centre (2000sq ft yes two thousand sq ft !, huge footfall) to purchase for 325K (i.e. about the price of a tiny 1 bed in d4/6), could probably rent it out for way in excess of the rent on a 1 bed apt.....again what am I missing ?
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Well for starters you're probably only looking at the assignment of a lease, and if the retail outlet is as large/prime etc as you say, there's probably only a very short time left on the lease if it's only going for €325k. If you take an assignment of this lease, which say for argument only had 4 years left, you'd have difficulty sub-letting it as any sub-lessee would face the risk of it reverting to the head landlord after the expiration of your lease.

Is the unit empty at the moment? Does it have a sitting tenant? If so what's the rent roll on the premises? The agent will provide you with answers to these fundamental questions.
 
this is a leasehold premises you mad thing. if you could buy a shop in dublin city centre for 325k do you not think every one would buy one. your original post about missing something...yes ..you are missing ....alot. i would advise you to put your money in rabo bank where you will get a good return and it will be safe from you....( min offence intended to your intelligence)
 
Money Man, after reading 2 of the 5 posts you have made I think you are trying to be funny in a "shock-jock" kind of way when you dole out advice.

Unfortunately you are not in the least bit humorous....... Instead irritating / inarticulate / idiotic springs to mind
 
WarrenBuffet, I second that......The pleasure of using AAM for me anyway, is that you can ask the vaguest of question and be pointed in the right direction to get the answer (sometimes to gain professional advice elsewhere or to another source etc).

If every time someone asked a vague question and got a response like Money Man's many of would shy away BIG TIME!
 
Sage of Omaha speaks!
Safe from you jibe is uncalled for and not in great taste.
Commercial market is tricky.
Location a key issue and parking facilities an important factor.
Vacancy can be a more significant problem compared to residential.
With so many out of town developments completed and in the pipeline one would have to be very careful about investing in the high street commercial property for leasing out.
I think in rural towns there is potential in finding a residential property with off street parking near commercial centre with development potential.
The tricky bit is to find one that has been valued at residential rates without commercial potential being recognised by the vendor.
Difficult ask but it does happen!
 
Guys thanks for the (constructive) replies

certain people don't know the difference between intelligence and knowledge...fortunately most AAM people do

(ironically I have a bachelors and masters from a top university and work for a top financial organisation in financial services for over 9 years and have extensive investments......just didn't know anything about commercial property - like I say the difference between knowledge and intelligence !!)

thanks again guys
 
chalky
with your financial services experience I want to pick your brain if you don't mind?
The flavour of the month at present in world markets seems to be Exchange traded funds in preference to giving your money to an active fund manager to underperform the market (in general!).
Put simply are etfs the panacea or are there pitfalls with them also?
Thanks
 
chalky said:
Guys thanks for the (constructive) replies

certain people don't know the difference between intelligence and knowledge...fortunately most AAM people do

(ironically I have a bachelors and masters from a top university and work for a top financial organisation in financial services for over 9 years and have extensive investments......just didn't know anything about commercial property - like I say the difference between knowledge and intelligence !!)

thanks again guys
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Hi

No offence mate, but I'd suggest you might be better off investing in a Commercial Property Managed Fund, rather than going it alone ... given you've no experience of this sector, may have limited purchasing power etc etc.

Check out Funds such as [broken link removed] or Irish Life's Commercial Property Fund, EBS do a Commercial Property Fund also, as do Hibernian I think.

Kind Regards


G>
[broken link removed]
 
Just a quick reply to markowitzman

Yep ETF's are a great idea, basket of shares that can be traded as a single share, makes it easy for the little guy to replicate a fund / hedge a portfolio.

Saves a lot of money on management fees etc and can be an excellent addition to a portfolio.

An ETF based on the Irish market was launched in 2005 and I do believe that their are arbitrage opportunities between the ETF and the corresponding basket of shares.

Cheers

Fintan
 
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