Commercial Property: 6 More Tips For Investing with a Private Syndicate

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Syndication can multiply your Equity, and help Minimise your RisksSeveral weeks ago, you began learning about how to buy Commercial property using a Private Syndicate.

Continuing on from that, here are your final six tips for success …

  • Price range
  • Required Lease Terms
  • Due Diligence
  • Legal and Accounting Issues
  • Timing of Equity into the Syndicate
  • Initial Yield

Price Range

Generally, your chosen properties should be in the $3 million to $5 million range; but other properties can be considered, if preferred by a particular syndicate.

Required Lease Terms

You should always strive for continuity of income. And therefore, you should be looking to purchase a property that has …

  • at least five years remaining on the lease;
  • rentals that are realistic, with the opportunity for market reviews; and
  • in smaller properties, the majority of space occupied by a single tenant.

Due Diligence

You should also have qualified building consultants should conduct a due diligence report on all structural and technical aspects of the property. This will help minimise the risk of incurring any unexpected maintenance, or replacement costs down the track.

Legal and Accounting Issues

The contracts should always be checked by lawyers and tax accountants, before the syndicate parts with the initial deposit.

Timing of Equity into the Syndicate

Just prior to purchasing a property, 30 per cent of your intended equity should be paid enter the syndicate; with the remaining 70 per cent being contributed within 28 days of the purchase contract being executed.

Initial Yield

Your yields should range from about 7 to 9 per cent, depending on … the type and location of the property, the condition of the building, and (most importantly) the lease structure and status of the tenant.

Bottom Line: Purchasing a property as part of a syndicate has a number of benefits. As a beginner, it means you are able to start investing a lot earlier than you might have otherwise thought. And at the same time as you can ‘multiply’ your equity, you can also help to spread your risk.

6 Earlier Tips

 

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