HUGE YIELD - 12.9% NET RETURN

Listing Number:  142
Posting Date:  06 August 2007






 
Price:$320,000
Listing:HUGE YIELD - 12.9% NET RETURN
Type:Unit/Flat
Category:Private Sale
Bedrooms:6+
Bathrooms:3+
Region:Nelson / Tasman
Site Area:741 m2
Address: Login
Building Area:343 m2
Property Image

Description:

This is a part residential, part commercial, leasehold building and consists of:

2 x 2 bedroom residential units
2 main street shops
1 rear pottery workshop

This is a 2-level concrete building with flats upstairs and shops downstairs and a rear shed that is being leased as a pottery workshop.

Sale Price:
$320,000
(this excludes GST, but as it is sold as a going concern this just flows through and you shouldn't have to come up with the GST. You need to be GST registered for that to work. Happy to discuss this if you need clarification)

Income:
Flat 1=$190/wk
Flat 2 = $200/wk
Shop 1 = $1000/month (excl GST)
Shop 2 = $950/month (incl GST)
Rear workshop = $650/month (incl GST)
TOTAL = $51,480/year

Expenses:
Ground lease = $4620
Rates = $3500
Insurance = $2200
TOTAL = $10,320/year

This gives a NET income of 12.9%
Note that the lease is due for renewal Dec 2008 and I expect the ground rent will increase to $12,000/year (maybe $15,000 on the high side). Even then, this will still provide a NET 10.6% return. No other hidden expenses. And, this does not allow for any potential rent increases over that period.

Upsides to this deal:
1) There are 2 residential compontents to this property to add stability
2) The National Party is one of the tenants - This means rock solid, reliable anchor tenant. They have just moved in, on a 3 x 3 x 3 lease.
3) National Party premises have just been totally refurbished - repainted, new carpet, new front door.
4) The building is concrete. Makes it hard for tenants to ever damage it.
5) Cashflow is awesome - you do the maths
6) Building is right on the main street - perfect for commercial tenants
7) Not run down or in need of big repairs

Downsides:
1) Its leasehold - you don't own the land

I had a valuation completed 8 months ago when I bought the property. It came to $320k. BUT, I personally think the valuation was low at the time - very little commercial ever comes up for sale so they had little to go on, and they tend to be a bit more conservative down there. Since then, 8 months have passed, National Party has moved in on 3 x 3 x 3 lease, National Party premises has been refurbished....

I'm selling as when I bought the place, I was planning on moving into the area but plans changed. I also want to consolidate.