An Aussie man has shared how a $90 Bunnings tool saved him from making a $2.7 million mistake.
Newcastle man Simon Borham was set to purchase a $2.7m commercial property that was advertised at 900 sqm, making it $3,000 per sqm.
The offer had been accepted and the deal was about to go through until Mr Borham measured the area himself.
“It’s part of doing your due diligence. When you pay by square metre, you need to make sure that it exists,” Mr Borham said.
He discovered the property measured at only 680 square metres, 220 less than he initially thought he was buying.
Net lettable area was integral to a successful commercial investment, he said, and wanted to make sure that he wasn’t overpaying.
“If you’re buying 100 sqm but you can only lease out 80 square metres, then you’re going to get a much lower return on what you thought you’d bought.”
Simon Borham a commercial property investor and buyers agent said there is a lot to gain from industrial property, if you don’t get “caught out.” Photo: Realcommercial.com
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Many people criticised the price of Mr Borham’s Bunnings measuring tool – the Bosch laser distance finder – saying he could use something much cheaper and said “I don’t care how you measure it, just make sure you’re measuring it.”
He tried to negotiate the price at the new square metreage but the deal fell through.
He didn’t mind though.
“You can’t talk yourself into a deal,” he said. “In commercial (property) in particular you have to be guided by the numbers and the numbers didn’t work anymore.
The tricks of commercial property investment
“In my view, there’s a lot more money to be made in commercial, but it is far more complex then residential.”
Founder of Mane Commercial, Mr Borham is a buyers agent who also teaches everyday Aussies how to invest in commercial property and avoid getting caught out.
He said commercial investment isn’t just for big corporates and could return a 5.5 per cent yield compared to residential that might only be around 2 per cent, or less.
Simon Borham the founder of Mane Commercial, a commercial buyers agency and runs
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Along with measuring the property, he has a 75 point due diligence checklist he shared with all his students.
“One of the other key (points) where people get tripped up all the time is approved uses,” he said.
“If you’re going to buy a warehouse to use as a gym, then you need to have approval for that because there are a lot of building code requirements based on what’s happening in that particular property.
“If the tenant hasn’t gone through the proper processes of seeking approval, then you won’t be insured. So it can be very significant.”
The checklist helped one of his students save $300,000 he was about to overpay on a property, he said.
Commercial investment in uneasy times
Despite property markets feeling the pressure with the conflict in the middle east as well as AI and economy fears, Mr Borham said the right commercial investment was still a strong option.
Everyday Aussie investors could start from having as little as $175,000 if you were running a business that could use the space, or $300,000 for purely investors, he claimed.
“Consumer confidence is lower now than it was during Covid,” he said. “I just see that as a great buying opportunity, as a lot of people in the market may wait for things to get better,” he said.
He believed these conditions could create “very good buying opportunities.”
“What’s not going to change from a commercial perspective is that people will still be the consumers and users of goods. Those goods need to be stored, manufactured and transported, so I think industrial has a pretty bright future.
“If you know what you’re doing then (commercial property investing) it can be quite lucrative, but the flip side is it can be easy to be caught out.”
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