Investing in commercial retail property

Hi, 1st post on AAM, so hello all.

I am seriously considering investing in a retail commercial property to create an extra regular rental income stream.
I'm 50, married, 3 (nearly) grown up kids living in Cork and mortgage free.
I have 650k to invest and am not going to leverage. I have found what seems to be a good prospect in Dublin (not city centre) with a gross yield north of 12% with >15 years left on a 25 year lease with no break options.

What are the general pro's / con's of investing in commercial retail and are there any general sources of information on commercial property investing in Ireland?

I would appreciate it if anyone who has experience in commercial retail investment would comment on / critique my plans.

Thanks

Hello,

Location would be a key consideration, along with quality of the covenant.

Some parts of Dublin are far more attractive for investment purposes, than others. Location, location, location still needs to be considered.

How strong is the sitting tenant, how good is the lease and are all terms being adhered to ?

I take it you are arranging a structural survey and having someone reveiw the planning, before a purchase is completed.

I'm surprised that you do not intend to put any level of debt on the investment, not even a small amount. It may be prudent to consider putting a small amount of debt on the property, for a couple of reasons such as (i) having a bank's solicitors inspect title, lease etc. (ii) permit you to retain some of your cash for a "rainy day" (perhaps your three "nearly grown up" kids may need financial assistance, college fees etc.).

Potentially a nice investment to have, assuming all of the above check out but also not exactly next to home, if you find you have issues to attend to in the future - so you may also end up needing to get a property agent involved to help manage the property, depending on your experience & knowledge, along with commute times.

MrEarl said:

It may be prudent to consider putting a small amount of debt on the property, for a couple of reasons such as (i) having a bank's solicitors inspect title, lease etc.

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That is a very strange reason for borrowing money! Your own solicitor will look at the paperwork. If, for some reason, you want a second opinion, pay a second solicitor, although I have never heard it done.

MrEarl said:

not exactly next to home, if you find you have issues to attend to in the future - so you may also end up needing to get a property agent involved to help manage the property,

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I think that this really is key. Property investment is a hands on business. You need to know the place well and you need to be able to visit your tenants often. I think you would be better off looking for opportunities in Cork.

Brendan

MrEarl said:

I'm surprised that you do not intend to put any level of debt on the investment, not even a small amount. It may be prudent to consider putting a small amount of debt on the property, for a couple of reasons such as (i) having a bank's solicitors inspect title, lease etc. (ii) permit you to retain some of your cash for a "rainy day" (perhaps your three "nearly grown up" kids may need financial assistance, college fees etc.).

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Thank you for your response.
My primary reason for not getting a bank loan for this transaction is, fortunately, I don't need to. I trust my solicitor 100% to fully inspect the title/lease and advise me accordingly. My kids college fees / expenses are taken care of and rainy day fund in place. Once my kids have their college education, they will go out into the big bad world armed with their education and a good set of values and it will be up to them to make it on their own, so no extra expenses foreseen there.
Yes, location is paramount; and for the business type, this location is ideal (now and in the foreseeable future), so am happy there.
Sitting tenant is in situ since mid noughties, so has survived the recession (in fact has expanded in the recent past), lease is vgood and all terms are being adhered to and up to date with rates, covenants etc.
I earn my bread and butter surveying property, so have a keen eye there. Yes, all planning needs to be reviewed but this will be done in due course.
Cork - Dublin commute times have improved enormously in last 10 years or so and I regularly make the trip. I don't see a need for prop mgmt. agent at the moment but wouldn't see this as a problem if required in the future.

Am I correct in thinking that a sound long term commercial lease together with a good tenant with a profitable business in a well maintained building would need less hands on Landlord time than a residential lease situation over the long term?

Brendan Burgess said:

I think you would be better off looking for opportunities in Cork.

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Thank you for your response.
I agree with you but I have been on the lookout for a suitable opportunity for quite a while now and have not been able to find something that satisfies my criteria (any that I have investigated / pursued in my price range have had red flags be it location, flood risk, property state or lease strength).
I am self employed and can effectively drop tools and be in Dublin in 3 to 4 hours in cases of emergency. I intend to visit premises / tenant monthly by appointment (and more frequently if needed) and then drop this back to quarterly when I feel comfortable with the situation.