Investing in commercial property

dominion23

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With ABSD increased to such an obscene amount, angie xcomsodered investing in commercial properties?

How does one go about doing it?
 

existential_reality

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I would say commercial is not recommended for newcomers, commercial stretches from HDB shophouses all the way to warehousing/Industrial so compared to residential it spans a much larger audience so unless you know what you are looking at and target tenant it be hard to advise.

With ABSD increased to such an obscene amount, angie xcomsodered investing in commercial properties?

How does one go about doing it?
 

existential_reality

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Those new launched strata titled retail units with no proper retail management are probably the worse, expensive, untenanted and un-sell able. If have central air conditioning good luck to the buyer :s13:



Agreed! I have friends stuck with commercial properties and willing to let go but no buyers and also difficult to find tenants!
 

MikeDirnt78

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Agreed! I have friends stuck with commercial properties and willing to let go but no buyers and also difficult to find tenants!

Your friend must be greedy.

He thought he can become a REIT manager? :s13:

Just put an asking price of $1. Confirm got buyers or tenants.
 

mummy1234

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Agreed! I have friends stuck with commercial properties and willing to let go but no buyers and also difficult to find tenants!

Rental is too high for many to consider. I considered renting to do business like nail salon or ice cream parlour or cafe before or even clinic.
 

MikeDirnt78

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Rental is too high for many to consider. I considered renting to do business like nail salon or ice cream parlour or cafe before or even clinic.

You need to make realistic expectation.

If many shops are empty and if you are still asking a high rate, nobody will want to rent.

Just drop down the asking rate. Otherwise, you got to suck air if no tenant.
 

existential_reality

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Some of the malls have so little foot traffic that you can offer 6 months rent free and no one will take it up. No business will want to put up renovation/reinstatement cost if no business.

Long time back when people bought these strata titled retail shops they did so to run their own business (i.e Sim Lim, Golden Mile etc) which created a vibrancy attracting shoppers. Now investors just buy and hope to rent out but in reality it just ends up as a dead mall. Even Gain city couldn't help the Alexandra Central Mall

HDB Shophouse is a better consideration but also not for the blind investors.


You need to make realistic expectation.

If many shops are empty and if you are still asking a high rate, nobody will want to rent.

Just drop down the asking rate. Otherwise, you got to suck air if no tenant.
 

MikeDirnt78

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Some of the malls have so little foot traffic that you can offer 6 months rent free and no one will take it up. No business will want to put up renovation/reinstatement cost if no business.

Tenants have to weigh in the relocation, renovation costs and effective rental rate with other available locations.

If the rate is really damn attractive and the business is a strong magnet regardless of locations, I am sure there will be some who are willing to take up.

In reality, there are just so many shops choices in Singapore. Some of the smaller landlords cannot compete with the bigger landlords like Capitamall and Frasers.

That's why it is better to just buy these REITs. If you see their dividends history, they have been stable so far. Best thing, you don't even need to manage the tenants.

Of course, Uncle Ervino will not agree with me.
 

andyhtc

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Commercial property is very risky. People need a roof over their head no not necessary need to rent a space for their business. Home business and online business are threats to the brick and mortar business model.
 

existential_reality

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Some business owners will take a chance, I spoke to them when they first moved to Alexandra mall surprisingly, but despite spending 50k or more on reno they still moved out due to lack of traffic. But of course there are so many variations one cannot rule out a tenant who maybe does not depend on foot traffic for their business and maybe attracted to them but I dealt with such tenants before and they usually prefer to get a industrial unit if possible (larger and cheaper)

One other thing also is the strata title malls these day sell the unit bare (i.e no metal shutters or anything) and that really increases cost for business owners as well.

For property it only make sense if you are using leverage, if pure cash play I would also put into REIT unless I spot a unit with potential en bloc play.

Tenants have to weigh in the relocation, renovation costs and effective rental rate with other available locations.

If the rate is really damn attractive and the business is a strong magnet regardless of locations, I am sure there will be some who are willing to take up.

In reality, there are just so many shops choices in Singapore. Some of the smaller landlords cannot compete with the bigger landlords like Capitamall and Frasers.

That's why it is better to just buy these REITs. If you see their dividends history, they have been stable so far. Best thing, you don't even need to manage the tenants.

Of course, Uncle Ervino will not agree with me.
 

MikeDirnt78

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For property it only make sense if you are using leverage, if pure cash play I would also put into REIT unless I spot a unit with potential en bloc play.

We have done this calculation before in the other thread.

Returns from a leveraged property is almost comparable to the returns from an unleveraged REIT.

REITs are already leveraged in their underlying.

6 to 10 months ago, Capitamall Trust was trading at $2.1+ when I did the returns calculation.

Now share price has gone up by 10%.
 

MikeDirnt78

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I had already shown with detailed calculations that the true leveraged returns of property can be CAGR 13% p.a. or even much more over a 20 years period, and you telling us that unleveraged REIT can achieve much higher return than that?!

Uncle you really got comprehension problem. Read carefully.

https://forums.hardwarezone.com.sg/...ties-5761633-post112527761.html#post112527761

Returns from a leveraged property is almost comparable to the returns from an unleveraged REIT.
 

existential_reality

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Not sure how the calculations stack up vs REIT but if I break down my original investment which I made around 2010 which I purchased around 240 psf, and it now worth about 500 psf and the rental yield per annum for past 8 years works out about 9% if I use the original purchase of 240 psf. (9% on average per year just to clarify)

There are some amount here and there for taxes MCST and what not which are not taken out from the above.


We have done this calculation before in the other thread.

Returns from a leveraged property is almost comparable to the returns from an unleveraged REIT.

REITs are already leveraged in their underlying.

6 to 10 months ago, Capitamall Trust was trading at $2.1+ when I did the returns calculation.

Now share price has gone up by 10%.
 

MikeDirnt78

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Not sure how the calculations stack up vs REIT but if I break down my original investment which I made around 2010 which I purchased around 240 psf, and it now worth about 500 psf and the rental yield per annum for past 8 years works out about 9% if I use the original purchase of 240 psf. (9% on average per year just to clarify)

There are some amount here and there for taxes MCST and what not which are not taken out from the above.

In my assumption, property price goes up by 3% pa in the long term.

For your case, the psf went up much more. So total returns are definitely on the extraordinary side.

Anyway congrats. I can see you are really a good property investor even before post #19 of this thread.
 

existential_reality

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Haha thanks I hope I am, to be honest how the forum calculates returns on various asset boggles me :D But I'm very connected property as an investment in general and will happily work with contractors and renovators to secure good tenants.

Also to be fair I had a ready tenant looking for a spot and willing to pay, the industrial property market at the time was bad hence the good price by the developer. Even to my surprise the market picked really quickly 1 or 2 years later when speculators moved in due to govt restrictions on the residential market. I should have flipped it during the peak of speculation damn missed that opportunity :s13:

But its a tough market now, very saturated I would caution anyone just buying unless they have something specific in mind or a strategy in place.

In my assumption, property price goes up by 3% pa in the long term.

For your case, the psf went up much more. So total returns are definitely on the extraordinary side.

Anyway congrats. I can see you are really a good property investor even before post #19 of this thread.
 

lingalong

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As mentioned by fellow brothers in the thread, the term Commercial Property stretches across multiple area. However In my opinion, just don’t touch property in Singapore.

A lot of buyers are expecting that once they purchase, they can rent out and collect rent to cover the cost overtime and it becomes passive income.

In a perfect world yes that would be the ideal situation, but we are far from that utopia.

I take for example an ordinary BTO at Tengah. People say “BTO, stay a few years then rent out, move to condo and use rent to pay finish loan”

Ask yourself, who wants to rent an apartment in Tengah? Even if there are people who want to rent it, how much premium can you command? In that block, in the entire estate itself how many people are also trying to rent it out?

I also notice that slowly there is a shift towards foreigners renting 1 room in the entire apartment. Will you accept that; a fraction of the rent you hoped for? Because there’s always another neighbour that would do it once desperation hits.

So that’s just the residential portion, I don’t think this pattern strays very far off other commercial property in Singapore.

But hey don’t take it from me, take a trip out walk along shophouses like katong, joo Chiat etc. Ask the current tenants how Long they have been here, how is business and how many options they had prior to this
 
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