The buying process and your professional team

Five years after an accountant told her no, Emma bought a shed. Here is the process that made it boring, which is the highest compliment a settlement can earn.

Emma’s 2022 plan was a borrowed residential unit, and chapter 3 told you how that ended: with a professional talking her out of it. Her 2027 plan looked different because the world did: with residential borrowing gone, her research led her through exactly the material in part three, and she emerged hunting a tenanted industrial strata unit. Small, generic, boring. Her words: “I spent five years learning that boring is the compliment.”

This chapter walks her purchase start to finish, because the process is the lesson.

Step one: structure before search

Emma did three things before opening a single listing.

She updated her fund’s written investment strategy to contemplate a direct commercial property with borrowing, addressing the diversification and liquidity questions in writing, because chapter 13 will show you the auditor reads that document.

She had her broker price the structure: two specialist lender quotes for a business real property LRBA at 65 per cent loan to value, pre-assessment done, so she knew her ceiling was about $420,000 and her rate would start with a seven.

And her accountant established the bare trust with a special purpose corporate trustee, so the correct purchaser name existed before any contract could ask for it. Total cost, about $2,200. Total value, one entire category of catastrophe deleted.

Step two: the search

Commercial hunting runs on different fuel than residential. Listings portals carry it, but the flow is thinner, and the best intelligence is often people: the leasing agents who know which landlords are tired, the managing agents who know which tenants are solid. Emma briefed three agents in her target industrial precinct with clean criteria: strata industrial, $350,000 to $420,000, tenanted, minimum three years lease remaining including options, net yield 6 per cent or better.

Eleven weeks and two near misses later, an agent called before the listing went live: a 168 square metre unit with a good roller door in a 1990s estate, occupied by a commercial cabinetmaker eight years in the same premises, four years remaining on a renewed lease at $25,000 net with fixed 3 per cent increases, tenant paying outgoings. Asking $400,000. Implied cap rate: 6.25 per cent.

Residential Emma would have driven past it without slowing. Commercial Emma saw a covenant with an eight year payment history and a lease doing 6.25 per cent of work.

Step three: due diligence, the commercial version

Here is where the money is protected or lost, and where commercial differs most from everything you have done before. Emma’s checklist, which is appendix G in worksheet form:

The lease, reviewed by her lawyer. Term and options confirmed, review mechanism checked, outgoings clause read word by word, make-good obligations noted, assignment clause understood. The lease is the asset; you would not buy a business without reading its contracts.

The tenant. Company search on the cabinetmaker, trading history, and the vendor’s rent ledger: 96 months, 96 on time payments. She rang the managing agent with one question that tells you more than any document: “would you re-let to them tomorrow?” The answer took half a second.

The outgoings. Two years of reconciliations against estimates, confirming the tenant genuinely pays what the lease says and there are no simmering disputes.

The building. A commercial building inspection: roof, structure, services, compliance items, and, this being older industrial stock, the asbestos register. Two minor items, both quoted, both used in negotiation.

Title and planning. Zoning confirmed, no easements with opinions, strata records reviewed for special levies and grudges.

The environmental question. Industrial land carries history. A cabinetmaker raised no alarms, but she asked the formal question about prior uses and contamination anyway, because the ugliest industrial surprises live in the soil.

The GST position. Chapter 9’s three questions: vendor registered, property tenanted at settlement, contract dealing with GST as a going concern. Yes, yes and yes, drafted properly, meaning no GST bridge and duty on the lower price.

Total due diligence spend: about $3,100. On a $400,000 purchase, under 1 per cent to know what she was buying.

Step four: contract

Her lawyer negotiated a two week due diligence period and a finance condition, tighter than residential norms but real, and the contract named the purchaser exactly: the bare trustee company as trustee for the bare trust. Read that twice and then remember it forever, because the classic LRBA disaster is signing in the wrong name, your own, the fund’s, the wrong company, and discovering that fixing title can mean paying transfer duty twice. The name goes on correctly, first time, checked by the lawyer against the trust deed, before anything is signed.

She negotiated $8,000 off for the building items, exchanged at $392,000, and paid the deposit from the fund’s account, because fund purchases run on fund money from the first dollar.

Step five: settlement and the first month

Between exchange and settlement: formal loan approval, insurance arranged from the settlement date, notices to the tenant about the change of landlord and new payment details, and the adjustments calculated, which on a tenanted purchase meant a credit to Emma’s fund for rent the tenant had prepaid.

Emma’s completed numbers, boxed for the record:

• Price $392,000, going concern, no GST payable
• Duty and purchase costs about $24,000
• Deposit $137,000 being 35 per cent, loan $255,000 over 20 years at 7.4 per cent, repayments about $24,500 a year
• Rent $25,000 net, tenant pays outgoings, fixed 3 per cent increases
• Fund buffer after everything: $82,000, more than a full year of repayments, outgoings exposure and fund costs

Rent covers the loan from day one, her contributions of around $24,000 a year build the buffer and pay down principal, and every rent review from here is pure margin. She stress tested it three ways per chapter 5 before exchange, in writing, and it passed all three.

The settlement itself took forty minutes and contained no news. Five years of patience, one boring afternoon. That is what winning looks like.

Your professional team

Emma’s deal involved five professionals, and the composition matters as much as the quality.

An SMSF specialist accountant or administrator. Not a generalist. The structures, elections and compliance rhythms in this book are a specialty; hire someone who does them weekly.

A commercial property lawyer. The single most important substitution from your residential habits. A residential conveyancer is trained for a different contract, a different risk list and no GST. The going concern clause alone pays this fee many times over.

A finance broker who writes SMSF commercial loans regularly. The lender pool is specialised and moves; a broker in that market knows today’s answer, not 2023’s.

A commercial building inspector, and where relevant an environmental consultant. Different building, different failure modes.

A commercial managing agent: , from settlement onward, unless you genuinely want to run outgoings reconciliations and BAS-ready rent invoicing yourself. Most trustees should not.

A buyer’s agent is the optional sixth chair, most valuable when you are buying outside your own city or your own confidence. Fees are real; so is the cost of learning a market slowly.

One principle ties the team together: they talk to each other early. The broker knows the trust structure, the lawyer knows the lender’s requirements, the accountant sees the contract before exchange. Every expensive mistake in this process lives in the gaps between professionals who were each individually excellent.

Find your sweet spot, or have the guts to walk away.