We have the opportunity to buy the premises we lease for our business but I'm not sure if this the best way forward?
If anyone has been in this situation or has some advice I would really appreciate it as we are having a tough time deciding what to do. To buy the property would be great for our business but just wondering if it would be the right thing to do when looking at it as an investment?
The property is roughly worth around $600K-$650 K.
It has a 3 bed 2 bathroom house that is unrentable at present. It would need about $30K spent to bring it up to scratch and then annual rent would be about $18000.
There is a separate shed on the property that we lease at $20592 a year (+ our share of council rates and water rates).
We don't really want or need the house but the shed and house are all on the same title so we cannot offer to buy the shed only.
If we buy the property at around $650000 the repayments would be about $2800 a month(interest only) so with what we are currently paying in rent and the rent from the house we would be able to cover the mortgage but I'm just wondering if this is the wrong way to do things as when you look at it from an investment point of view it is about $15600 CF- per year.
We initially only signed the lease for 12 months as we intended to buy our own premises after the first twelve months instead of paying rent.
We are interested in buying the property because there is a good chance that it will be rezoned in a few years time and it is in a great position with lots of passing traffic that has helped our business to grow and be noticed. I have spoken to council and the rezoning process is already underway and has been for a few years but there is no guarantee that rezoning will happen and definitely no idea of when it may happen but we are happy to buy it now at a cheap price and sit on it long term.
If it were to be rezoned we would set our business up on the back of the property and build commercial units along the front and rent them out which would make the property CF+ so we would eventually be able to run our business from there rent free. If rezoned the value would increase dramatically so there is a good chance for CG as well.
At present the shed that we lease is on about a quarter of the land and has a zoning for special use - only a certain type of business can operate from there and because of this it has often sat vacant for a long time in between tenants. The remainder of the property where the house is built is zoned as special rural.
We have one IP that is CF+ (slightly) and has a 80% LVR. We have just completed renos on this property and would be able to rent it out and hold on to it for CG as it is in a great area. We have a few personal debts that may affect our chances of finance for the new property so we may have to sell our IP. My worry is that we would be selling a CF+ property (value of $380K) to buy a CF- property in the hope that the new property is rezoned in the future.
Should we take the risk?
If anyone has been in this situation or has some advice I would really appreciate it as we are having a tough time deciding what to do. To buy the property would be great for our business but just wondering if it would be the right thing to do when looking at it as an investment?
The property is roughly worth around $600K-$650 K.
It has a 3 bed 2 bathroom house that is unrentable at present. It would need about $30K spent to bring it up to scratch and then annual rent would be about $18000.
There is a separate shed on the property that we lease at $20592 a year (+ our share of council rates and water rates).
We don't really want or need the house but the shed and house are all on the same title so we cannot offer to buy the shed only.
If we buy the property at around $650000 the repayments would be about $2800 a month(interest only) so with what we are currently paying in rent and the rent from the house we would be able to cover the mortgage but I'm just wondering if this is the wrong way to do things as when you look at it from an investment point of view it is about $15600 CF- per year.
We initially only signed the lease for 12 months as we intended to buy our own premises after the first twelve months instead of paying rent.
We are interested in buying the property because there is a good chance that it will be rezoned in a few years time and it is in a great position with lots of passing traffic that has helped our business to grow and be noticed. I have spoken to council and the rezoning process is already underway and has been for a few years but there is no guarantee that rezoning will happen and definitely no idea of when it may happen but we are happy to buy it now at a cheap price and sit on it long term.
If it were to be rezoned we would set our business up on the back of the property and build commercial units along the front and rent them out which would make the property CF+ so we would eventually be able to run our business from there rent free. If rezoned the value would increase dramatically so there is a good chance for CG as well.
At present the shed that we lease is on about a quarter of the land and has a zoning for special use - only a certain type of business can operate from there and because of this it has often sat vacant for a long time in between tenants. The remainder of the property where the house is built is zoned as special rural.
We have one IP that is CF+ (slightly) and has a 80% LVR. We have just completed renos on this property and would be able to rent it out and hold on to it for CG as it is in a great area. We have a few personal debts that may affect our chances of finance for the new property so we may have to sell our IP. My worry is that we would be selling a CF+ property (value of $380K) to buy a CF- property in the hope that the new property is rezoned in the future.
Should we take the risk?