North Shore Commercial Real Estate Investment From a Lawyer's Perspective
Commercial real estate on the North Shore of Auckland has been an increasingly popular investment strategy for people. The combination of the plentiful supply of warehouses, retail outlets, offices, and light industrial properties plus the growing demand for these buildings makes North commercial real estate extremely attractive. However as with all aspects of property, it is important to analyse the numbers and also to get good advice from someone who knows the area such as a North Shore commercial real estate lawyer.
Most properties on The Shore are able to generate a good cash flow from strong lease agreements. This gives the investor two sources of profit. Firstly they can receive good trading profits from the rental income during each financial year. The second and probably the biggest source of profit is from capital appreciation when they come to sell the building. For people aiming to get into this lucrative investment business it will be worth reading the points below to get some better insight into the business and industrial property market.
Most properties on The Shore are able to generate a good cash flow from strong lease agreements. This gives the investor two sources of profit. Firstly they can receive good trading profits from the rental income during each financial year. The second and probably the biggest source of profit is from capital appreciation when they come to sell the building. For people aiming to get into this lucrative investment business it will be worth reading the points below to get some better insight into the business and industrial property market.
Who is investing in commercial property?
There are a number of categories of investor in commercial real estate on the North Shore. Firstly there are business owners who have decided that they no longer want to pay monthly rental fees to their landlord. Instead they prefer to own their premises.
This makes sound sense from a cash-flow perspective for the business since they will be reducing their monthly expenses. However, this does depend on the way the purchase and ownership of this building is structured. For example, it may be worth the business owner setting up a separate company or even a family Trust to own the building. This separates the two entities which can be a valuable risk management approach. If the business runs into financial trouble then the Trust or owning company will not be affected and will still own the building.
In this situation where the premises are owned by a different entity rather than the occupying company, then it is a good idea to charge a market rent. For one thing the owner will want income to pay their mortgage or other costs. Further, if the occupier is getting a low or no rent then the IRD may want to investigate.
The second typical investor is a family trust. These often have assets, cash or borrowing facilities available to them. By buying some commercial properties the Trust can generate an income for the Beneficiaries as well as a potential lump sum capital growth.
The third class of investor is large professional property companies which have extensive portfolios of different assets. These will have their own in-house team of experts and specialists to carry out cash-flow forecasts as well as searching for prospective premises to buy.
There are a number of categories of investor in commercial real estate on the North Shore. Firstly there are business owners who have decided that they no longer want to pay monthly rental fees to their landlord. Instead they prefer to own their premises.
This makes sound sense from a cash-flow perspective for the business since they will be reducing their monthly expenses. However, this does depend on the way the purchase and ownership of this building is structured. For example, it may be worth the business owner setting up a separate company or even a family Trust to own the building. This separates the two entities which can be a valuable risk management approach. If the business runs into financial trouble then the Trust or owning company will not be affected and will still own the building.
In this situation where the premises are owned by a different entity rather than the occupying company, then it is a good idea to charge a market rent. For one thing the owner will want income to pay their mortgage or other costs. Further, if the occupier is getting a low or no rent then the IRD may want to investigate.
The second typical investor is a family trust. These often have assets, cash or borrowing facilities available to them. By buying some commercial properties the Trust can generate an income for the Beneficiaries as well as a potential lump sum capital growth.
The third class of investor is large professional property companies which have extensive portfolios of different assets. These will have their own in-house team of experts and specialists to carry out cash-flow forecasts as well as searching for prospective premises to buy.
What does every property investor need?
However experienced an entity is with commercial real estate investment, whether an owner-occupier or a specialist investment company, everyone needs to have a team of expert advisors and specialist service providers.
These include brokers who can suggest premises that meet the criteria the investor is looking for, an accountant to crunch the numbers, a good financier and an experienced lawyer.
For the broker, these can be hired on a retainer basis or as is more common, they are paid a commission on the settlement of the sale. The broker or agent will have a sound knowledge of the commercial buildings in their area and so can alert the investor when a suitable building is coming onto the market.
If the investor is a property company they more than likely will have an accountant on their payroll who will research and verify the numbers from purchase, finance, profit and cash-flow perspectives. However, if you are an occasional buyer of commercial property, such as buying the building you occupy or represent a family trust, then you absolutely must talk to an accountant who has worked on commercial property deals before. Besides running the numbers to show the profit and cash-flow, there are many tax implications, both good and bad that you need to be aware of. The accounting firm can advise you of your position with regard to the IRD.
Finance is obviously an important factor. Even if you are in a position to pay cash, this in fact may not be the best use of your resources. But assuming you need mortgage finance to complete the purchase, then having a relationship with a commercial mortgage company in Auckland can give you access to various sources of funding.
How a commercial real estate lawyer helps North Shore property investors
The last expert you need in your team is a commercial real estate lawyer. This type of property has far more issues to consider than residential conveyancing. Besides the actual purchase agreement, there are probably going to be various other clauses to add into the contract. You may not think of these but a lawyer experienced in commercial property will be able to alert you to these.
You also need to have the leases reviewed and then re-issued to the tenants under the name of the new owning entity. It is essential that the leases are strong and that you have the ability to easily collect rents or take swift appropriate action if they lessee falls behind in their payments.
It may also be that you need to create a new ownership vehicle. If it is a company your accountant will be able to do this but if you want to form a Family Trust, then your lawyer will have to carry out this task.
Further, if you are the owner-occupier, then there will be leases and agreements that need to be drawn up here too which your legal team can also handle. You may also need to transfer the ownership from your trading company to a Trust. The transfer is in effect a sale so your law firm will need to be involved here too.
However experienced an entity is with commercial real estate investment, whether an owner-occupier or a specialist investment company, everyone needs to have a team of expert advisors and specialist service providers.
These include brokers who can suggest premises that meet the criteria the investor is looking for, an accountant to crunch the numbers, a good financier and an experienced lawyer.
For the broker, these can be hired on a retainer basis or as is more common, they are paid a commission on the settlement of the sale. The broker or agent will have a sound knowledge of the commercial buildings in their area and so can alert the investor when a suitable building is coming onto the market.
If the investor is a property company they more than likely will have an accountant on their payroll who will research and verify the numbers from purchase, finance, profit and cash-flow perspectives. However, if you are an occasional buyer of commercial property, such as buying the building you occupy or represent a family trust, then you absolutely must talk to an accountant who has worked on commercial property deals before. Besides running the numbers to show the profit and cash-flow, there are many tax implications, both good and bad that you need to be aware of. The accounting firm can advise you of your position with regard to the IRD.
Finance is obviously an important factor. Even if you are in a position to pay cash, this in fact may not be the best use of your resources. But assuming you need mortgage finance to complete the purchase, then having a relationship with a commercial mortgage company in Auckland can give you access to various sources of funding.
How a commercial real estate lawyer helps North Shore property investors
The last expert you need in your team is a commercial real estate lawyer. This type of property has far more issues to consider than residential conveyancing. Besides the actual purchase agreement, there are probably going to be various other clauses to add into the contract. You may not think of these but a lawyer experienced in commercial property will be able to alert you to these.
You also need to have the leases reviewed and then re-issued to the tenants under the name of the new owning entity. It is essential that the leases are strong and that you have the ability to easily collect rents or take swift appropriate action if they lessee falls behind in their payments.
It may also be that you need to create a new ownership vehicle. If it is a company your accountant will be able to do this but if you want to form a Family Trust, then your lawyer will have to carry out this task.
Further, if you are the owner-occupier, then there will be leases and agreements that need to be drawn up here too which your legal team can also handle. You may also need to transfer the ownership from your trading company to a Trust. The transfer is in effect a sale so your law firm will need to be involved here too.
Finding a commercial real estate lawyer
If you do not already have a lawyer who can handle these matters for you then you can search online for commercial lawyer on the North Shore. The biggest firm is McVeagh Fleming and Co who have a team of partners and solicitors who can give you good legal advice on buying and investing in commercial property. To learn about a North Shore commercial real estate lawyer click more....
www.mcveaghfleming.co.nz
If you do not already have a lawyer who can handle these matters for you then you can search online for commercial lawyer on the North Shore. The biggest firm is McVeagh Fleming and Co who have a team of partners and solicitors who can give you good legal advice on buying and investing in commercial property. To learn about a North Shore commercial real estate lawyer click more....
www.mcveaghfleming.co.nz