- Commercial Buying Tips
- Commercial Buying FAQs
- Commercial Selling FAQs
- General Commercial FAQs
Tips – Buying a Commercial Property
If you decide to purchase a property, it is a good idea to have a checklist of issues to be considered, choices to be made and things to be done. Your financial adviser and your property professional will also be able to provide help and information.
Your checklist should include:
1. The type of property you are after (shop, factory, office)
2. Investment property or owner occupied
3. Size and space
4. Location (high traffic flow, main street exposure)
5. Design (industrial with office space)
Payne Pacific Real Estate can assist you to find a property but first decide what price range you can afford, both now and in the future. This will narrow down your options.
Deposit
You will often need to pay a deposit of 10% of the purchase price. This figure may be lower if mortgage insurance is taken out.
Stamp Duty and Other Costs
The biggest cost of buying a property apart from the sale price is Government Stamp Duty and GST, payable on all commercial premises (some exceptions exist - see your agent or accountant). Don't forget to also take into consideration costs such as legal fees, building and pest inspection reports and actually moving.
Using your Checklist to Look
Using all available research and sales information, start qualifying the properties beginning with the price in your preferred areas, in The Leader 'Domain' Real Estate Liftout, Sydney Morning Herald and the internet. Attend as many auctions as possible and inspect as many properties as your can to know exactly what your money will buy you. Also keep your agent informed and we will then be able to offer additional advice and also advise you of new listings before they reach the media
Better to go Shopping with Finance Organised
Once you decide to look for property, contact your lending institute for financial approval. Although the final approval may not be given until a property is chosen, many institutes can give preliminary approval. To avoid delays and the possibility of missing out on the property between the time you put a deposit on a property and exchange contracts, it is advisable to be ready financially to proceed as soon as the sale is negotiated.
Contracts to your Solicitor
Once you have chosen a property, ensure your solicitor receives a copy of the Contract For Sale as soon as possible. Make sure your solicitor explains everything in the contract to you, so you know exactly what you are paying for. Never presume that everything you see in the property will be included in the sale.
The Lease
If the property is occupied by a tenant, ask for a copy of the lease details and registered lease. (A copy will be included in the Contract for Sale.) Once the lease is assigned to you after purchasing the property all obligations under the lease become your obligations. Check for any hidden clauses, fixed rent reductions, mid-lease fitout contributions. These will all affect your investment.
Exchange of Contracts
Upon exchange of contracts you will be required to pay the 10% deposit and to sign your Contract for Sale. The deposit will be held in trust until settlement occurs.
Settlement of Contracts
Just prior to settlement day, your solicitor will advise you to carry out a pre-settlement inspection. This is to ensure that the property and all inclusions noted in the Contract for sale are in the same condition as when you last inspected the property.
FAQs – Buying Commercial Properties
What is commercial and industrial real estate?
Commercial real estate is typically retail shops and offices while industrial real estate generally refers to factories and warehouses. The term "commercial real estate" is generally accepted these days as covering industrial as well as commercial real estate.
Some people talk in feet and square feet and others in metres and square metres and it's confusing. What does it all mean?
Despite the change over from imperial to metrics the old ways still persist as many people still cannot fully relate to metrics.
The conversions are: |
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LENGTH: |
AREA: |
What is the difference between a warehouse and a factory?
Warehouses are primarily for storage and distribution and need to have a high roof line for pallet racking and other storage (6 metres minimum) and good access for large vehicles carrying containers. Factories are for manufacturing and are less reliant on height depending on the manufacturing industry involved. These premises would perhaps need to be in close proximity to public transport to cater for employees.
Why use a specialist commercial and industrial real estate agent like Payne Pacific?
Commercial and Industrial real estate valuation, marketing and management requires a high degree of analytical ability to assess values and future potential of property correctly. Also required is the ability to converse in a meaningful way with the buyers, sellers and tenants of commercial and industrial real estate who are business oriented and require a high degree of specific knowledge in this class of real estate.
Do specialist commercial and industrial real estate agents charge more?
No. In any case fees are not regulated and are negotiable. Many wealthy property investors owe their success to their choice of professional commercial and industrial real estate agent and you get what you pay for. Never choose an agent on the fee structure alone. The final result is where the money is ultimately made not through negotiating lower fees.
Can I inspect the property prior to settlement?
Yes. The selling agent can arrange this for you.
Can someone bid on my behalf at an auction?
Yes. The person bidding on your behalf will need your written authorisation. The authorization must be given to the auctioneer prior to the commencement of bidding.
Does the highest bidder at auction have the first right to negotiate after a property is passed in at auction?
There is no automatic right at law which gives the highest bidder the first right to negotiate with the vendor when a property is passed in at auction. On some occasions this right may be offered by the auctioneer but subject always to instructions from the vendor.
Does the vendor have a right to make a bid for their property at the auction?
Yes. The vendor is entitled to make a vendor bid at any time during the bid. If however the vendor wishes to make more than one bid the auctioneer is obliged to announce the number of vendor bids that will be made.
How much deposit do I have to pay?
Selling Tips
The whole process of selling property may be very daunting to you, however with the correct advice and dealing with an agent you know you can trust and rely on, like Payne Pacific Real Estate, it will take away a lot of the worry.
There are five factors which need to come together in order for a successful sale to occur:
1. Location
2. Financing
3. Marketing
4. Presentation
5. Price
Method Of Sale
The two most popular methods of sale are:
1. Private Treaty
2. Public Auction
Both methods have their advantages, however we recommend you discuss them with your agent to see which method will benefit you most.
Preparation Checklist
Contact Payne Pacific Real Estate so that we can organise a time to sit down and discuss your needs, the timing of your sale and your marketing campaign.
Prepare your property for marketing.
Contact your solicitor to prepare relevant documentation and have the Contracts for Sale delivered to our office.
If your property is currently leased, ensure your solicitor receives a full copy of the lease document.
Tips – Selling a Commercial Property
What is commercial and industrial real estate?
Commercial real estate is typically retail shops and offices while industrial real estate generally refers to factories and warehouses. The term "commercial real estate" is generally accepted these days as covering industrial as well as commercial real estate.
Why use a specialist commercial and industrial real estate agent like Payne Pacific?
Commercial and Industrial real estate valuation, marketing and management requires a high degree of analytical ability to assess values and future potential of property correctly. Also required is the ability to converse in a meaningful way with the buyers, sellers and tenants of commercial and industrial real estate who are business oriented and require a high degree of specific knowledge in this class of real estate.
Some people talk in feet and square feet and others in metres and square metres and it's confusing. What does it all mean?
Despite the change over from imperial to metrics the old ways still persist as many people still cannot fully relate to metrics.
The conversions are: |
|
LENGTH: |
AREA: |
What is the difference between a warehouse and a factory?
Warehouses are primarily for storage and distribution and need to have a high roof line for pallet racking and other storage (6 metres minimum) and good access for large vehicles carrying containers. Factories are for manufacturing and are less reliant on height depending on the manufacturing industry involved. These premises would perhaps need to be in close proximity to public transport to cater for employees.
Do specialist commercial and industrial real estate agents charge more?
No. In any case fees are not regulated and are negotiable. Many wealthy property investors owe their success to their choice of professional commercial and industrial real estate agent and you get what you pay for. Never choose an agent on the fee structure alone. The final result is where the money is ultimately made not through negotiating lower fees.
Do agents have a set commission based on a scale?
No. The fee charged by the agent is a negotiated fee and can vary from agent to agent depending on the services that are provided.
Does the agent have to submit all offers to the vendor?
All 'genuine' offers must be submitted to the vendor. The agent should have agreed with the vendor what exactly constitutes a genuine offer.
Can I be released from my exclusive agency agreement?
An exclusive agency agreement is a binding contract for the duration of the agreement. Depending on the circumstances the Department of Fair Trading may release the parties from the agreement.
What is a conditional exchange?
A conditional exchange means that the exchange of the contracts is subject to something else occurring ie subject to a building report or finance approval and is therefore not to be relied upon fully. Depending on the condition one or other of the parties may be able to withdraw from the contract without incurring a penalty.
What is an unconditional exchange?
An unconditional exchange means the parties have committed to the contract without any reservations or conditions.
What is gazumping?
Gazumping is where a vendor has verbally agreed to sell a property to a purchaser, but then either raises the price or sells to another party. The risk of gazumping can occur at any time whilst there is no signed contract. This usually occurs during the period when the purchaser is conducting finance and property enquiries.
Does commercial property have a cooling off period?
No. Cooling off periods only applies to residential property. Once the commercial contract for sale has been exchanged neither the vendor or purchaser can change their minds without incurring a major financial loss or cost.
FAQs – Commercial
What is commercial and industrial real estate?
Commercial real estate is typically retail shops and offices while industrial real estate generally refers to factories and warehouses. The term "commercial real estate" is generally accepted these days as covering industrial as well as commercial real estate.
Why use a specialist commercial and industrial real estate agent like Payne Pacific?
Commercial and Industrial real estate valuation, marketing and management requires a high degree of analytical ability to assess values and future potential of property correctly. Also required is the ability to converse in a meaningful way with the buyers, sellers and tenants of commercial and industrial real estate who are business oriented and require a high degree of specific knowledge in this class of real estate.
Some people talk in feet and square feet and others in metres and square metres and it's confusing. What does it all mean? Despite the change over from imperial to metrics the old ways still persist as many people still cannot fully relate to metrics.
The conversions are: |
|
LENGTH: |
AREA: |
What is the difference between a warehouse and a factory?
Warehouses are primarily for storage and distribution and need to have a high roof line for pallet racking and other storage (6 metres minimum) and good access for large vehicles carrying containers. Factories are for manufacturing and are less reliant on height depending on the manufacturing industry involved. These premises would perhaps need to be in close proximity to public transport to cater for employees.
Why should I have my commercial and industrial property managed by a specialist agent like Payne Pacific?
Collecting the rent is only part of the job. When you engage a specialist agent to manage your commercial and industrial property they do just that - they manage your property.
Management involves:
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Advising on acceptable lease structures so that your investment not only retains its value but also has growth built in wherever possible. » Negotiating lease terms with the tenant to obtain results that ensure that the value of your property is enhanced by the lease and not restricted or worse - devalued. » Dealing with your tenant in an expert manner regarding queries and problems that inevitably arise from time to time with the property and/or tenancy - these negotiations should only be handled by professionals to achieve the best outcome.
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Ensuring the property is maintained. Advising the owners on rental and sale values and generally keeping them informed of market trends. The future value of your property is dependent in no small way by the quality of its management - to take chances with a non specialist is unwise and likely to result in rough running for your investment and lower returns.
Do specialist commercial and industrial real estate agents charge more?
No. In any case fees are not regulated and are negotiable. Many wealthy property investors owe their success to their choice of professional commercial and industrial real estate agent and you get what you pay for. Never choose an agent on the fee structure alone. The final result is where the money is ultimately made not through negotiating lower fees.
Do specialist commercial and industrial real estate agents charge more?
No. In any case fees are not regulated and are negotiable. Many wealthy property investors owe their success to their choice of professional commercial and industrial real estate agent and you get what you pay for. Never choose an agent on the fee structure alone. The final result is where the money is ultimately made not through negotiating lower fees.
I own commercial and industrial real estate and I collect the rent myself but I am unsure of current rental and sale values. How can I get help?
If you manage your own property investment you should have your property valued by a registered valuer on a regular basis to ascertain your true position. An "opinion of value", a "market appraisal" or a "rental appraisal" is not the same as a valuation. A formal valuation is a document that can be relied upon and is used to assist in obtaining finance and is required by lending institutions.
My business has grown and I need to relocate to larger premises. I have 3 years remaining on my existing lease. What can I do?
You need to locate and secure new premises and sub-let or assign your existing lease to a new tenant with as little time lapse as possible between the two transactions otherwise you will be paying double rent. Paying double rent for a short period of time at least is highly likely depending on demand for property in your location.
Will GST apply to commercial property rentals?
GST will normally apply to all leases of commercial property entered into from 1stJuly 2000 provided that the lessor is registered. There are a number of transitional provisions which cover leases entered into prior to 1st July 2000, and in some circumstances no GST is payable. However, you will need to seek independent advice in this regard.
Will GST apply to the outgoings associated with the lease?
GST will apply to some of the outgoings paid by the landlord in respect of property ownership. Repairs, maintenance, insurance and similar costs will attract a GST however exceptions include water rates, council rates and land tax. Once the landlord seeks to recover these costs from the tenant, depending on the terms and conditions of the lease, the GST will be applicable to the recovery, as they are treated as a separate supply by the landlord. Again, commercial leases vary greatly and independent advice will need to be obtained.
Should all commercial property owners register for GST?
GST will apply to the sale of all commercial property by a registered entity. This includes commercial property owners with an annual turnover (including rental income) greater than $50,000. Those commercial property owners who generate less than $50,000 may choose to register for GST, however they are not compelled to do so. Any property owner who chooses not to register for GST cannot then claim input tax credits for GST incurred on running costs. To determine whether to register for GST a property owner must group all of their enterprises together to calculate turnover. Property owners should seek independent professional advice in this regard.
How must the property be used?
The tenant must only use the property for the purpose stated in the lease, open for business at times usual for that type of business, keep the property clean and dispose of waste properly and comply with all laws, regulations and consents relevant to the conduct of the business.
The landlord can consent to a change of use and cannot withhold consent unreasonably.
What happens if the property is damaged?
The tenant is not required to pay rent if the property is not able to be used, or a proportionate amount if the property is partly usable. If the landlord considers the damage is such as to make its repair impracticable or undesirable, either party can terminate the lease by giving at least 7 days notice in writing.
Who is to repair the property?
The landlord must maintain the property in a structurally sound condition and maintain essential services. The tenant must maintain the property in its condition at the commencement date and do repairs to keep it in that condition but does not have to alter or improve the property, fix structural defects or repair fair wear and tear. The tenant must also reimburse the landlord for the cost of fixing structural damage caused by the tenant.
What insurances must the tenant take out?
The tenant must have a current insurance policy covering public liability, and damage to plate glass and other portions of the property, as per the terms of the lease.
What are the landlord's rights of access to the property?
The tenant must give the landlord (or his authorised representative) access at any rebeing used, viewing the property as a valuer, prospective buyer or mortgagee or inspecting, cleaning or repairing another property.asonable time for the purpose of inspecting the condition of the property or how it is