Send us Fan MailThe real cost of buying commercial propertyBuying a $2 million commercial property doesn't necessarily mean you need $400,000 in cash just because the bank will lend 80%.In this episode, we unpack the costs that sit around the purchase price and the cash a buyer may need both to complete the transaction and after settlement.What we discuss00:00 | Introduction Welcome to Commercial Property Uncovered and today's discussion about the real cash requirements when buying commercial property.00:44 | The $2M commercial property question Why an $1.6M loan on a $2M property doesn't mean $400K is all you need.01:59 | The five categories of costs Government charges and GST, due diligence, lender costs, legal and accounting fees, and post-settlement costs.03:03 | Commercial valuation costs Why commercial valuation fees work differently from residential lending and what buyers should budget for.04:14 | GST and stamp duty How GST treatment can materially affect the amount a buyer needs to fund, including the impact on stamp duty.05:17 | Going concern vs vacant possession A discussion around GST treatment, leasing arrangements before settlement and the importance of having the right advisers involved.07:36 | GST and SMSF purchases Why GST funding can be particularly important when buying commercial property through a self-managed super fund.09:23 | The costs buyers overlook Due diligence, lease reviews, building reports, legal costs, relocation and fit-out costs.10:44 | How do you value commercial property? Why commercial property valuation is different from residential property and the role of yields, comparable sales and independent valuations.14:04 | Valuation as a negotiation tool Why getting a valuation doesn't automatically give a buyer leverage in a negotiation.15:53 | When should you get a valuation? Why buyers considering an independent valuation should think about doing it before signing a contract.17:46 | What happens if the bank valuation is lower? How finance conditions and lender valuations can affect a transaction.19:08 | Hidden costs in contracts, titles and leases Land tax, congestion levies, easements, outgoings, make-good provisions and environmental considerations.23:43 | How much cash should you keep after settlement? Why buyers need to budget for repayments, relocation, fit-out and other post-settlement costs.25:34 | Why fit-outs often cost more than expected The importance of allowing a contingency for fit-out costs and unexpected expenses.27:48 | Adding value before you own the property How a tenant's investment in a fit-out can potentially increase the value of a property they later want to purchase.29:29 | The $2M commercial property case study A worked example looking at the cash requirement for a $2M vacant possession purchase.32:37 | The GST surprise A real-world example where an unexpected GST issue arose shortly before settlement.35:19 | Don't skimp on your professional team Why the right commercial lawyer, accountant, finance professional and property advisers can be important to the transaction.36:15 | The big takeaway The purchase price is only the starting point. Buyers need to understand the total cash required, the costs of making the property operational and the buffer they need after settlement.Key Takeaways1. The deposit isn't the full cash requirement. GST, stamp duty, professional fees, finance costs, due diligence and post-settlement expenses can materially increase the amount required.2. Understand GST before you sign. The GST treatment of a commercial property transaction can have a significant impact on the funding required.3. Valuation needs to happen at the right time. If you're using an independent valuation to assess the property before committing, consider doing that before signing the contract.4. Budget for what happens after settlement. Fit-out, relocation, ongoing repayments, repairs and other costs need to be considered alongside the purchase price.5. Don't assume the bank's valuation solves the pricing question. A bank valuation serves a different purpose from determining what a buyer should be prepared to pay.6. Build the right team early. Commercial property transactions can involve significant financial and contractual complexity. Getting the right advisers involved early can help identify issues before they become expensive problems.Resources:Property Budget Checklist - Download HereCommercial Property Uncovered: Beyond the ContractHosted by Vicki Likoudis, Richele Janjatovich and Nicole Faid.🏢 Richele Janjatovic | Finance: [Mecca Finance Group] + LinkedIn 🏢 Vicki Likoudis | Buyer & Tenant Advocacy: [Impacta Commercial Advocates + LinkedIn] 🏢 Nicole Faid | Property Contracts: [Accord Conveyancing + LinkedIn]📧 Have a commercial property question you'd like us to answer? Send it to commercialpropertypodcast@gmail.comFollow us on Instagram: @CommercialPropertyUncoveredSubscribe, follow and leave us a review wherever you listen to ...
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