Commercial Property Deals
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it's the real estate podcast brought to you by ray white the largest real estate and property group in australasia and welcome to another episode of the real estate podcast available on iheart radio also spotify and apple podcasts or wherever you get your podcast from it's a thursday and the month of may getting very close it's the 28th of april for 2022 And in just a moment, Scott O'Neill is here from Rethink Investing and we're going to be looking at a few commercial property acquisitions Scott has set up just to give you an insight into how those deals look and felt. But first, let's have a look at the main centre forecast.
It's the main centre forecast with propertybuyer.com.au.
Looking at today's weather for Sydney, expecting one or two showers and a high of 25 degrees. Melbourne partly cloudy with 23. Brisbane expecting a few showers with 27 degrees. And in Perth, expecting rain to clear later and a high of 21 degrees.
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Well, there is some talk that the Reserve Bank may introduce an interest rate rise before the federal election. Yes, data from the Australian Bureau of Statistics yesterday showed inflation rising by 5.1% over the past year. That is more than twice the rate of wage growth after a 2.1% spike through the first three months of the year. So many commentators are betting that the RBA will act more sooner rather than later, waiting until after the federal election. So whichever way you cut it, we are getting very close to that interest rate rise.
Let's Talk Commercial, a podcast series with Scott O'Neill.
Yeah, Scott O'Neill is back again from Rethink Investing. Good morning, Scott. Another busy week.
Good morning, Craig. Yes, it is. Everyone's back from Anzac Day and the long weekend with Easter. So yeah, a lot of work to do, really, but it's good.
Yeah, I think that we're going to get back into a bit of normality, as you say. Last couple of weeks, it really just throws the weeks out, particularly if you're super busy like you are. Now, we're going to be having a look at a few deals that you have done for your clients. This is a good one because it gives us a real breakdown on some of the numbers and the first one is an interesting one. This was a new client and their first investment securing a commercial property which was an industrial asset. The property had the bonus of some upside in both rental income and equity through strata titling from one title to four. So give us a little bit of a breakdown here, Scott, of how this deal looked and worked.
Yeah, sounds good.
Well, this is a classic industrial property. But what was unique about this property was there's four units on it. So it's on one title currently, but there was four units. The total purchase price for this was $4.15 million. But if you split the property up via a strata title method, it would have created about a $750,000 equity uplift. And that was really not doing much other than some council paperwork and getting a town planner out and whatnot. There was no physical construction needed to get that done. So the good thing about industrial properties right now, which were discussed in previous podcasts, is they're going very good with fallout of COVID. There's a lot of people manufacturing items, storing them, buying them online.
Like logistics is a real big aid for industrial property. So vacancy rates have dropped. So rents are growing. But yeah, this South Brisbane property, it's in a growth corridor as well. So we thought this was perfect for this client because it had a yield just under 6%, some uplift on it. And for tenants, we'll create a bit of safety in the income as well. So good all-around investment. Yeah, the client will do well out of this one.
Yeah, what is it about Brisbane, eh? It's still going pretty well, both residential and commercial. Is that the case?
Yeah, look, I just believe it's earlier on in the growth cycle. We've seen Sydney and Melbourne do their thing, and it's created a disparity between the prices.
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