Hi I Thought we'd look at some numbers and have a talk about renting versus buying property and why is that important to an engineering channel like this? Well, I'm talking about, of course, commercial property and commercial lab space. Office space like I've got here and it's quite an interesting topic. A lot of people ask about it all the time, and of course, if you're not watching, well, Louis Rossman Russman Real Estate Now is in season two and it's fantastic. Compelling viewing.

Nothing like that here. Anyway, we might talk about that and of course our friend Blanche might know she's had issues with moving lab and there's more issues again with renting versus buying and stuff like that. So it's a rather interesting topic. highly dependent upon the country and the area that you're living in and your personal financial and other circumstances and stuff like that.

But I'll just talk about and show you the numbers for me here personally, here in Sydney and in particular the Baulkham Hills area which I am here in Sydney. So let's have a look at a rent A versus a buying property shall we? Please forgive the messy handwriting I don't like these Wacom tablet like they do the job, but I don't like the disconnect between the pen and the screen. It's just not as good as say riding on my Microsoft Surface tablet for example. Anyway, let's let's have a look at this now if you don't know.

I used to have an old lab and it was 50 square metres and I was in there for eight years or something like that and that is actually rent. Well you can think it might be rent-free because I actually own that property. when I moved out of the garage I looked at what was available and like should I rent or should I buy and I was looking for a small space sort of I was originally looking for about 20 square meters because my old lab was like four or five square metres and I thought off I get four or five times bigger than that. that'll be plenty and I'm glad I didn't go I all my I actually bid on a place that was I think 25 square meters or something which was here but we were actually gazhams on that one and I'm not even sure if that's legal here anyway.

dodged a bullet there I think because that was too small and ultimately turns out that the fifty square meters is too small hence my current position I am actually looking to buy a new commercial lab that are moving but we'll get into that. so I bought that when I moved down the office because I looked and the prices were a quite reasonable back then as we'll talk about and it was basically no difference in price between renting a place and buying it and and what the interest would cost plus a little bit more to pay off the property. So it made sense to actually buy a property in that case. but it just so happened that I was in a reasonable financial position that I could actually do that and we have to get into loans, commercial loans and talking about all that sort of stuff because that really matters.

especially in say, friend Blanche's position for example of why she's having a real problem trying to buy a place now I actually had equity in my home so if you don't don't know what that means, it means that I've built up I've paid extra money into my home loan over the years that all that money is available for me to actually pull back out and do anything I want with it I could you know go buy a Lamborghini or whatever and the Bake has basically no saying that I can do whatever I want. So I actually withdrew some money to put the deposit down for the old lad the old 50 square meter lab and then I started paying that off and as it turns out that was actually turned out just by luck happened to be a really good investment decision because usually commercial property unlike residential real estate which is you know, skyrocketed here in Australia. It's just, you know, nuts, prices have gone crazy. Usually commercial real estate does not do that.

It basically the the value of commercial real estate stays pretty steady over the years. It might rise to meet inflation and you know things like that. But as a rule, as a general rule, commercial property does not increase in value. You don't buy commercial property thinking that it's going to double in price in five years time and you're going to flip it for a profit.

doesn't happen. You buy commercial real estate either. Two, like I did as an owner-occupied to move in and use the space or you rent it out. and you used to get really good returns on commercial property here in Sydney If you weren't getting ten percent return on a commercial property ie.

the amount you pay versus the rental income you're getting from it, you weren't even try and so you'd often get 12% or more something like that. The rental returns were really good, but the capital growth on that property was borderline zero. You're just like you wouldn't think about that, it's going to gain in price. Maybe in 20 years it might go up, you know, 50 percent or something like that.

But they installed a train line here and that just once that happened, the prices exploded here in commercial property. But it wasn't just in this particular area, just all over. Sydney I'm not sure about other parts of Australia I Think it's the same, but commercial property went up with the boom in residential property now. I Don't know if was unprecedented, but ever since I've been looking at the market, it's wow.

It was really unexpected. So I actually bought my property back then. and since then I have paid it off. Okay, because it didn't cost me much and that property has since gone up 250 percent.

That's why it's It's making it really hard for me to now swallow, buy and another trying to buy another property. but we'll get into this. Sorry, this could be a long video buckle-up Dorothy Kansas has gone bye-bye So some people might think. Oh, because I own that fifty square meter lab which is in the same complex.

Here is what: I'm currently renting it. by the way, Then you can think of it as free. but it's not because it's actually currently rented out to a bunch of lawyers. By the way, for seventeen thousand five hundred dollars per year.

So really, that's effectively lost income if I'm using that myself. so it depends on how you want to look at it. But but to me it's it's seventeen thousand five hundred dollars per year in lost revenue. And the thing we have to talk about as well is outgoings.

Now for a 50 square meter commercial office in a commercial building like this one which has lifts and everything else, you know the outgoings are about 450 square meters are about $5,000 a year. and that building just happens to be one of the pricier ones in this business park. But because of its location and it's you know, features and stuff like that. But yeah, five thousand dollars a year.

So even if I'm getting my free or even if I move into that office and get my free rent I'm still paying five thousand dollars per year now as it turned it out. I'm sure a lot of people know that fifty square meters wasn't enough when I had employed David of course we'll both walking or working in there. plus um, will doing packing and shipping as well. and we didn't have enough room in 50 square meters to have a lab and a packing and shipping place.

It was just getting ridiculous. We're done packing and shipping on a square meter of floor that we that happened to be spare. You know it was just nuts. So I decided to rent a 30 33 square meter office just up the road.

So I actually had two offices. I had the lab where I'd shoot my videos and then I had the 33 square meter office where I would edit my videos and that's where we do packing and shipping from. and I've got a packing and shipping person Sue's who if you buy something from the store, it's almost certain that she's got a pack and ship it as she's away. I'll do it myself.

but anyway, I'm yeah, so she does all the packing and shipping and logistics stuff like that. So that's what the 33 square metres. So around about that 83 80 odd square meter mark I found was pretty much the space I needed because 50 square meters really only does a lab and maybe a little bit of space. But if you've got lab, if you've got two employees and you got packing and shipping, it's no, it's not nothing and that's 538 square feet I get the calculator out for that are for you Yanks So there you go, you're working square that weird square feet stuff.

So rent on an office in this particular Business Park for 33 square meters was about $15,000 per year. So even though you know this one was free effect free in quite it was costing me 15 grand a year extra plus another 5,000 outgoings Because this building this 33 square meter building was a much nicer more modern building than the one that my old lab was in. So you pay a bit more for the outgoings because we had like a concierge service for example which was really good so they would sign for you know down in the foyer that signed four packages for me and I can leave packages with them so that the couriers can pick them up really quiet. you know, handy stuff but you pay, you know you pay for that.

Now at the time I decided just to rent the 33 square metre office because I really didn't want to move my lab I thought I know look I've just no okay the left where it is because there's thousands of items to move. It's a pain in the butt. So I decided and yeah, availability as well. There wasn't a huge amount of availability and this 33 square meters just happened to be a really nice location that I liked as well.

So I could have got cheaper if I went to a nearby business park just across the road which is more of an industrial business park. The business park I mean now is more pretty much just commercial office. They don't really have much in the way of like shared more industrial ones. you know, the ones with the roller doors and and whatnot and that are like 80 percent warehouse.

you know, twenty percent office or something like that. They're usually like mostly just hundred percent commercial office. You know lawyers and real estate agents and doctors and advertising agencies. and I know engineering consultancies and things like that stuff.

you know, just commercially. a regular sort of commercial office type space. So I was effectively paying if you count the seventeen thousand five hundred dollars per year in in lost rent which you do plus the outgoing. So I was paying ten grand in outgoings total.

Okay, plus thirty two thousand five hundred dollars per year. So that's like forty to over forty two thousand dollars per year in and effectively to rent these two places although one of them's not rent so anyway, but effectively, that's what it was costing me per year. So I Finally decided a year ago. Of course, you know the big lab move I Finally decided.

look I'm gonna I'm gonna move the lab and I'm gonna consolidate as getting a bit sick and tired of moving going between the two locations and editing and shooting, it's much more efficient when I can now just meters away is my bench and edit I can Edit: oh I forgot something I'll just go shoot an extra clip or you know, do this or whatever I think of something I can add and I don't have to go up the road, it's like it's much more convenient anyway. So I decided to rent a hundred square meter place and once again average term andhave lability. There wasn't much stock in the park and you know I didn't want to pay too much and it was a matter of getting so I didn't want to pay any more than was paying at the moment. So I managed this new place.

I'm now renting for thirty thousand Five hundred dollars a year and the outgoings are about thirteen thousand dollars because it scales up with the size of the unit. You pay more as a percentage for the entire building and if you don't know the outgoings include. It's mostly a strata fees which maintain the buildings that you've got to maintain the lifts and the cleaners of course this. These officers typically don't have their own facilities ie.

bathrooms. Typically they've got a common shared bathrooms on each level. Down ends good when you don't have to clean your own toilet, someone does all that cleans up everything. maintains the whole building and the premises.

and the car parks. And the garbage room for example, the dumpster room where I get all my stuff from is like oh, you, you've got to pay for this So thirteen thousand dollars outgoing. so it's about the same as what I was paying as what I was paying before. basically and I get I now get seventeen thousand five hundred dollars a year rent from my old lab.

So as I said, I'm now actually starting to look for actually buying a another lab to actually move into because I don't want to pay a rent forever because well, a lot of people save rent, is lost money and all that sort of jazz. But it depends upon your particular financial circumstances, my financial circumstances. it doesn't make R It doesn't make sense to continue renting forever. It made it made sense up here and at the moment.

just Judith You know circumstances at the time, and availability and quirements and things like that. But I can't go on renting a place forever and paying thirty thousand five hundred dollars a year. I've got to think long term here. so I've got another year left on my lease, but there's hardly any stock in the park at the moment.

in fact, almost nothing in the size that I'm looking at. So I've got to start putting out the feelers now and setting up email alerts on all of the various site commercial real estate sites and stuff like that waiting for something to pop up. So then when something does pop up, I can get notified of it and you know, decide and go and inspect and decide if I want to buy that place or not. So if we look at, say, a 10-year time frame and I plan on doing this for at least the next ten years, then of course you're looking at three hundred and five thousand dollars over the next ten years.

So that is a heck of a lot of money for me to pay out and get no return from really sure. I'm still getting my seventeen thousand, five hundred dollars a year. Hopefully you know if you can find a tenant and they don't move out, etc. etc.

Now of course I could enact the clause in the lease up here and boot those lawyers out of my old lab and I could actually move back in to my old lab. But as I said, 50 square metres is just not big enough. David doesn't actually work here in the office anymore, he works from home. Now it's just it's better and more convenient.

So you know, really? I found that a that a hundred square meters without extra employees here is probably too big. so I'm probably looking around about the 80 square meter mark or something like that should do it because you pay effectively per square meter actually here in the business park I am I actually bid on at the time because I really liked that old 33 square metre office. There was one next door to it that actually went up for option auction. It was also 33 square meters and I bid on it but it actually went for at the time this was two years ago.

Maybe it went for a ABB's It went for a record for this business park which was over ten thousand dollars per square meter. So it went for like 300 sold for three hundred and thirty thousand dollars. and that's basically what is the going rate for. like really a grade office space.

here in the business park you'll pay ten thousand dollars a square meter that does come down based on the size of the unit, the bigger it is it comes down. but but pretty much this this one. I mean at the moment a hundred square meter one if I wanted to buy this if it was available I don't mind this place that's really good I'm gonna window and everything Wow and anyway if I want to buy this it would go for around pretty because their locations fantastic and it's in there quite and older but quite reasonable. You know it's still hanging on to its a grade building rating and you would pay a million dollars for this but there are some other ones in the park that you could get for eight thousand dollars a square meter or even less something like that.

As I said, prices have gone up like two hundred, two hundred and fifty to two and a half times basically since I originally. Oh well, in last for pretty much for four years. Something like that, they're more than double. Its just nuts.

So 80 square meters let's say I can get eight thousand dollars a square meter cuz I don't I don't need a grade office space like this. I'd be happy with one of the lesser buildings which are still which there's a couple in the park here. I still like quite like one of which I have my storage bunker in. So I do actually have my 40 plus square metre storage bunker.

so that's where I store a lot of stock and things like that and all my junk and and stuff like that. So thankfully I've still got that and I'm not giving that up. You're gonna pry that from my cold, dead hands. So anyway, we're looking at about six hundred and forty thousand dollars there.

say for example, to buy an 80 square meter place something like that and and like I'm not gonna pay a million dollars for a place. that's just, you know, absolutely insane. In fact, buying a place at six hundred thousand dollars that freaks me out enough. But anyway, let's look at Boeing for is rented.

So let's say we wanted to buy a place for 640 thousand. We found the ideal place and we want to buy it interest rates at the moment, residential interest rates and we'll get into this and I round about three and a half percent something like that. So you know that I don't think they're gonna go any lower. They're probably going to eventually go back up, especially over a 10-year time frame.

But anyway, interest rates are really low at the moment. It's almost free money. Not quite, but you know it's getting pretty good anyway. So just the interest on that alone is twenty two thousand, Four hundred dollars per year.

But that's not as much as what I'm paying at the moment. Thirty thousand Five hundred dollars per year. So that money is especially over 10 years. Three hundred five thousand dollars.

It's going into someone else's pocket instead of mine. Well, it's it. Doesn't go into my pocket the first twenty two thousand four hundred goes into the bank's pocket. but you eventually drop their course, paid the place off, especially over ten years.

but look at numbers in a moment and paying it off and stuff like that. But basically, if I continue because I can still of course continue to pay the thirty thousand five hundred dollars per year which I'm paying at the moment I can afford that and businesses doing okay and so I would I would put that same pays to put that same thirty thousand dollars into it instead of just paying off the minimum interest rate I want to pay more money into it? And as I said here in Australia I've heard it's actually different in other countries, but here it's common as mud. In fact, you wouldn't get a loan that didn't offer ie. either a redraw facility or an offset account.

Where as I said that extra money you put in to your home loan or to your business loan or whatever it is, you can actually read all that back out without any paperwork, nothing. say just give me the money and and and a choice. You can do whatever you want with it. So that's actually a really important part of owning your own home, which a lot of people don't realize that a lot of people will go.

Oh just you know, rent forever or whatever. but having your own home. as I said, you effectively have equity in your home and this is the great part. you become your own bank.

As I said, I was able to pull out the deposit for this lab here that I originally bought I was able to just pull that money out and just go by that property without asking anyone's permission. Nothing the bank didn't even know about it. I simply withdrew that money so they didn't care that I withdrew their that money like because it's mine let alone what I spent it on. So I used that money.

All that I noticed was that my interest rates went back up because the balance went down so I was paying a bit more interest. So when I withdraw that money, I'm effectively I've got to repay that. I'm effectively taking the loan out at residential interest rates. and that's the important aspect of this, which we'll get into.

So not only having equity in a home, your own home allow you to become your own bank, which is absolutely a fantastic financial position to get into I'd Highly recommend it if you can. Actually, your circumstances allow you to do that, but it allows you to then get deposits on other properties without any paperwork and get it at home loan. residential interest rates really important because now we have to talk about loans and it's the problem that Fran Blanche has had. and I have exactly the same problem when you're self-employed like I am.

even though I am a proprietary limited company I am my own company. From a banks point of view, I am a director of that company doesn't You can be a multi-billion dollar company. Well, maybe you know there real smartly different from multi-billion But let's say you know a 10, 20 million dollar company with hundreds of employees. Something like that.

If you're the director of that company, if you have a controlling interest in that company, you are deemed to be self-employed even if you draw a wage as an employee as I do I actually draw a wage and I pay myself dividends as well. On top of that, as a director of the company, that's another way to get money out of the business. Personally, it's another way to avoid tax. Unfortunately, they they get you both ways anyway.

they I even though I draw a consistent wage every year from my company, I am deemed to be self-employed and if you're self-employed most regular banks do not want to touch you and that's just yeah, it's I've heard it's worse in the US and that's a problem Fran has had and she just simply cannot get alone. It's not just that you're self-employed it's also the regularity of your income and stuff like that. And that's why I actually said I was so glad and actually I made a mistake I said I got the deposit for the previous lab out of my home loan. Know the back then that the commercial property was cheap enough that I was able to take the full amount out of my home loan because I'd been paying off my home for so many years that I had enough money in there to actually withdraw and by the by the lab outright.

So from day one, I owned that lab outright. but of course the security against that is my effectively my home. So I was paying off their the interest on my home. loan and if I didn't repay that, they'd repossess my home.

So there's a there's a risk there, of course because you're using your house as your collateral. but if you're confident in your business and your circumstances and stuff like that, the risk was essentially zero. So you know. Anyway, I owned that lab from day one I eventually paid that back down.

So I effectively have paid off that office and now own it. But I was able to do that because I was my own bank. Now let's actually have a look Now if I'm buy. If you're buying commercial property, okay, there's two ways to do it.

One is to get a is to buy it under your well here in Australia Of course this is all. Australia's specific is to buy it under your company. So to buy it under your business and then your business owns the property and well, there's some. We won't get into the issues and liability and other type issues to that.

Let's just say that you want to buy it personally, but let's say you want to buy it under your own name. So now you have to if you don't have the money, if you can't withdraw it like I did from the equity in your home and just buy it outright. And then there's no paperwork, no nothing. You simply just go buy it, Sign on the dotted line here, it's yours and you just hand them a bank cheque and that's it.

Bob's your uncle. If you can't do that, then you've got to get a loan. And of course, if you want a loan for a commercial property. Oh, here's where you can come a gutter because as I said, interest rates here currently 3.5% But what's this business Loan variable? Six point eight, Five percent, Six Point Eight percent.

You know there's some down here which is three point Eight, Three Point Six seven. but look at these right. Residential missin the top ones Bad. Geez.

don't go to A and Zed anyway it look reson business term loan. Okay, so but res sick what that means is residential security. Unlike a house, they will. The bank will then hold your house as collateral against the loan.

You generally can't do it well. you can do it for commercial property. We'll get into that. but generally the banks don't want commercial property as collateral.

You can only get the low, low, or lower interest rates if you put up a residential property ie. your house against it. So if you go right I Want to buy this commercial I Found this office I Want to buy and then they'll go. Oh well, that's great, but you've got to put your house up as collateral.

They want the residential house because it's easier and to resell. If they have to repossess your house and then sell it, it's easier to do that and they're going to get more for a residential property than they will for commercial real estate. So if you want a low interest rate like three Point Six Seven, Three Point Eight three, something like that, they will only accept residential real estate as collateral for that. But you can actually are put up your office as collateral against the loan.

But typically you'll be paying six point Eight Five percent. You know, six or seven percent double the interest rate you would with a residential loan and that could be a real killer at that. You know, three and a half doesn't sound like much, but if you double that Wow six seven percent. That's a lot.

And on top of that, they're gonna want a larger deposit. You might be with buying a house or an apartment or whatever you want to buy residential real estate, you might be a 5 or 10% deposit might be enough 20% if you want to avoid mortgage insurance and all that sort of jazz. But for a commercial office space, they're gonna want like 35 40 percent minimum deposit. So unless you can come up with that cash, somebody evil withdraw it from the equity.

your home will do whatever. Then yeah. so if I want to actually buy that 640 thousand dollar place for example, I'm gonna have to pony up like you know, a quarter of a million bucks in in deposit for that. and once again, I can take that out of the equity in my home loans.

But this is where it gets rather complicated. If I want to pull out just the deposit, say the deposits. Two Hundred thousand dollars. If I just want to pull that out of my home loan I can do that and I can go to the bank and say here, here's my two hundred thousand.

Here's a check for $200,000 This is my deposit and they go right. You've got your forty percent, You know you've got your deposit. Okay, that's great, but we're gonna charge you six and a half or seven percent interest rates. and that's just that's just not so really.

You want to I need something that's reasonably affordable that I can pull once again, pull the full amount out of my home and effectively own that property outright and then pay off my loan at residential interest rates instead of commercial property interest rates. Because if I don't do that, then I'm going to be in the same position that Fran is in where you know it's really difficult to get a loan because I'm self-employed and yes, I can potentially get one because my financial situation is pretty good, but unfortunately it's It's actually not that great this year in theory, because my company I just did my tax returns and I actually made a loss this year for the first time. So it's not a real loss, it's just that I happen to have purchased a lot of stock because I buy a lot of multimeter stock and that costs many, many, tens of thousands of dollars to buy all this stock of all this supplies. and I happen to buy those just before the end of the financial year.

so I wasn't So there was a lot of money out going and then I wasn't getting the money back in until the next financial year. It's fine. It averages itself all out over the years. and oh by the way, I've done an amp hour talk about how much the amp hour.

We should listen to the amp hour anyway. I did a talk on there where my company ran out of money one day I had money in the bank. next day you and I I was almost almost bankrupt. but then I ran out.

It was a cash flow issue. the company wasn't in danger, but you know you got to watch your cash flow anyway. my. So if I go to the bank and say hey, I'd like a commercial loan they're going to ask my account right? Give us all your financial returns, the accountant, or handover the financial returns and they'll go.

Oh, you may lost this year, your company's going downhill. They don't care about the details, They don't care that I you know, just purchase stock just before the financial year and I'm gonna get the money back a month or two later. They don't care about that I don't care about the last. You know, four or five years or something that have been a profit every year.

They just say oh, you made a loss this year Oh god, you're a risk that that puts you way up into the red, you know, So you can come a gutter right there. Even though your business is sound, you can prove it. You can give them all the numbers and show that you're doing great, but that they don't care. They've got rigid systems in place and that your business is making a loss.

This year, they're very unlikely to give it a loan to a company that's just making a loss unless you're some huge player or something like that. But you know, just a one-man band like me? No. So yes, it really is a big struggle for self-employed people to get loans. I Four or five years ago or something, I refinanced my house again and went with a new lender to get lower interest rates and better split things.

So I can I Could use the equity in my house better and it was a real struggle. We had to go through a broker to find a you know, a specific niche baked in a specific niche loan that would actually lend to someone like me. and they lend. You typically will lend you like 80 percent of the value of your property.

So if your property is worth a million dollars though, and you own it, they'll extend you a line of credit on your house effectively of dollars. But you'll get home loan interest rates. So let's go into a repayment calculator. for example: Let's say I wanted to borrow that six hundred and forty thousand.

Doesn't matter where the money comes from if it comes out of the equity in my home. I'm paying three point five percent home loan interest rates on that. Let's say I'm looking to pay that off over ten years and being going to be very aggressive and I want to own that in 10 years time for example. and I want to put in an extra ten thousand dollars a year over that $22,000 a year interest that we talked about.

So that's yet the extra monthly there. We're looking at Seven thousand, one hundred dollars a month if we want to pay it off over the ten years there. So yeah, that's not terrific, Is it? That's a lot? That's like $85,000 a year repayment if you want to aggressively pay it off over ten years. So I may have to like pay it over for the next 20 years to to pay that off, right? But but the thing is right, it doesn't matter I'm effectively every extra dollar I pay into that loan is going in to my the equity in a new office instead of that thirty thousand dollars a year going into someone else's pocket.

Sure, any excess then comes into my pocket as wages or dividends. but I'm not. You know getting equity in a property. So really, you know over the next 20 years let's say I still want to pay the thirty thousand dollars a year.

There you go, that's much more reasonable that's you know, like 50k a year or something like that. I'm ignoring the outgoings because regardless of what place I get I'm still going to have to pay the outgoings. It just doesn't matter if you own it or you're renting. By the way, if you don't know if you rent a commercial property space the renter hallway here the renter always pays the outgoings.

So my lab that I'm getting seventeen thousand five hundred dollars a year for all that money goes into my pocket because the tenant, the lawyers there are paying the five thousand dollars a year out going. So I just you know, the management company who takes care of all. they just take a small couple of percent or something like that and the rest of that goes into my pocket. but the tenant always pays the outgoings which is great.

So yeah, it's it's not terrific. Unfortunately the problem is the 640 thousand dollar cost of buying say a place you know I might be able to get one a bit cheaper, but it's gonna be. you know I like I could go much cheaper if I wanted to drive 15 minutes away to another suburb further out west. Here here in: Sydney the further out west you go, the cheaper stuff gets.

So that's just how you know the socio-economic you know geographical system of Sydney further west, the cheaper you get I can get ie. I could probably buy less than half that I could even pay a third of that to get like a warehouse II type you know office II type place further out west but I don't like that I like having the lifestyle have been in this business park I could walk to work I can ride my bike to work everything's here and go to the gym here I go like in the schools in nearby everything. There's a real lifestyle choice for living here I'm sick of driving for my job I did that my entire career you know, drove or took public transport to work I don't want to do that anymore so I really want to buy in this business Pike As I said, I can even get cheaper if I go the business park just across the main road here but then I've got to get across the main road and that's just a jet ssin everyday and a pain in the butt. you know I really like being in this particular part of the park and but I pay a premium for it.

but I thankfully I'm in a reasonable position that I can actually pay a premium for that now I hear a lot of people saying Dave just move back into your old lab, sell all your crap, and move into the 50 square metres and it's free. You never have to pay anything. Well, yeah, I could do that and that's a you know, a fallback plan. If I was falling on hard financial times I wouldn't be going out and you know getting there spending six hundred forty thousand dollars.

but I'm in a reasonable financial position where I can do that. I you know this would actually going back into 50 square metres year I could do it, but it'd actually be a step back financially because what else am I going to do with my money and goes in my pocket? I can invested in other things, but I'm you're better off investing in. Well you know the when you buy this, it's likely not. Even if there's a huge market crash, it's likely not to go down by a large amount really.

So the risk. the downside risk is quite small on commercial property like this and I can always sell it. There's always a desperate availability for officers are like this. As I said stock in this business partners generally you know it's it's pretty rare and they sell pretty good if you put one up, especially the smaller one so the bigger ones are harder to sell.

You know they're a couple hundred square meters and stuff like that that cost millions of dollars and gotta find someone willing. But like the smaller ones like 50 80 square meters they're they're just snuck up like that. So really, even if I went in and you know bought this place and in five years time I don't know my circumstances have changed or whatever by bad luck or bad design or just I move on to something else unlikely and then I can I can always sell the place and the money extra money I've put in goes off the equity and instead of you know yeah I don't like the idea of renting three three hundred and five thousand dollars over the next ten years going into someone else's pocket. That doesn't sound like a plan to me, but at the time you know renting this hundred square meter place I have my reasons rent in this 33 square meter place I had my reasons but I think it's time to bite the bullet and just get a larger place.

So I've got the feelers out, but there's nothing really at the moment. there might be there's one available which I kind of like, but it's not actually for sale. but I've talked to the agent and they said ah, maybe they're thinking about selling if they can't rent it. maybe March next year though might be thinking about selling it stuff like that.

anyway. I've got another year here on my lease and I'm happy where I am. but yeah, I think it's gonna be better if I can look at buying a place. but unfortunately it's not going to turn into a Rossmann real estate drama because here in Sydney is totally different.

in New York where Lewis's Buy and looking searching to buy a new place. it's just every office here is like, well, you don't have to do anything to it unless you wanted to fit it out for some specific crazing. you're a doctor or you know you wanted to make it look fancy pantsy because your lawyer - lawyer or whatever. By the way, the lawyers who rented my fifty square meter lab they ripped out the old little cubicle that I had and they made a bigger cubicle with a glass huge glass window on it for a meeting boardroom and things like that.

and you know they just made it look a bit more fancy pantsy. but yeah, I just need a blank office space and just move into it. I don't have to do anything to it. So basically you do not buy down a run-down commercial property here.

It's just not a thing. Maybe in the city it might be a bit different. might be slightly more like the New York thing where you might get a dump or something like that. but no, not in business parks.

Commercial business parks like this, everything is is pretty much a grade. Even your B grade stuff is as like a luxury compared to New York where everything's rundown and as people there say, if it looked any better, you couldn't afford it. And there's no drama with the leases here. For example, what? Louis's like he's talking about 300 page leases and it's just nuts.

No, everyone just goes with the boilerplate template lease here and it's like it's like 10 pages long and it's It's all standards or fine. everyone's assigned. so you just negotiate a little bit on the price. But apart from that, you know you might have a little change in the lease or something like that.

but like I got a minor change in the lease here for specific. use that I do. but it's no. there's just no drama.

you simply sign on Little Lime, it's yours. So sorry. Yeah, there's no gonna be any epic drama of me searching for a new place here. As I said, there's no stock.

okay I can't go around looking unless I want to look at the you know, three five hundred square meters or something like that just for kicks. but no I'd just be a tire kicker. So anyway, yeah, the plan is to do that and eventually pay it off. You know it's gonna take a long time because just prices just going up so much.

I'm hoping for a market crash, you know another GFC Just can't wait but a bit really. Even even if that happens, prices are unlikely to go down. they've just they've leveled up and there's nothing I can do about it. I should have bought.

you know, three four years ago shoulda coulda Well, you know actually my old fifty square meter lab the one next door which was I think seventy square meters. it went up for sale and I think it was three hundred and thirty thousand dollars or something at the time. and I should I buy this next door I can knock out the walls and make one big place like I wouldn't have to get anyone's permission I could just knocked out the walls and because non-load-bearing this could have you know they're just these partition II wall things. If you don't know, the walls between these officers are just met, there's nothing.

They're not supporting walls at all so you can rip me if you were in both spaces. just rip it out. And for those wondering, the dumpster room. Dave Never ever give up the dumpster room.

It's okay I own this lab I've always got the key and access card. It's okay I'll never lose the dumpster. G so what was that? Half an hour or something? Sorry. Anyway, yeah, real estate anyway.

like I Highly recommend if you have the means inability in life by a property, become your own a bank because it gives you hugely flexible options because if I was paying six seven percent interest rate on something like that, I I would not be able to afford that like a Paul Maybe you know I might be out, but I I wouldn't do it I think I'd go back with my tie I'm pretty I'm pretty risk adverse I'd I'd rather go back to my tail between my legs, go to my 50 old fifty square meter lab and just make do rather than pay seven percent interest on six hundred and forty thousand. Six hundred and forty thousand times seven percent. That's forty four thousand, eight hundred a year. just in interest.

No thanks, Just interest alone is more than what I'm paying at the moment. So yeah, that's that's new. You wouldn't. you wouldn't get very far.

but once again, you could argue. Even if you just paint off minimum interest rate, it's better than paying this into someone else's pocket. As long as you know the market doesn't fall out and this thing suddenly halves in price and then you're forced to sell it. Well, you're not forced to sell it just because it has in price.

But if your circumstances change and you are forced to sell place and sell it at a loss, then you're going to come a gutter. But you know, assuming it just holds its value, you have the potential upside on that. You know in ten years time, it might be worth 800 thousand dollars or something like that. So even if you're paying forty-four thousand dollars a year interest or whatever forty-five fifty thousand dollars a year interest, it's still better.

Some would argue, and they're rightly so. that's better than paying thirty thousand dollars into someone else's pocket, but only if your financial circumstances allow. But I Just hate. I I Would do anything to avoid paying seven percent.

Interest I Want to pay my three and a half percent residential interest rates on a commercial property? But it means you've got to be in a position like myself where I have a lot of equity in my own home. Where I can potentially pull out the money and buy a commercial unit outright. So I get the entire value of that three and a half. You can somehow get it split so that you know you're paying off.

Say you could put down a deposit and that comes out of your home loan interest. So you're only paying three and a half percent. Say on half of that value. For example, say, three hundred thousand, you're paying three and a half percent and the other.

You go and get a commercial property loan and then put up the commercial property as the collateral. And but then as I said you'd pay, you know seven percent. Interest So you could split it that way if you didn't want the whole risk to be on your own home and it. but it gets complicated and God just anyway.

I am on the lookout. So if I do I'm If places pop-up and there is more stock being built in this park, new buildings are about to be finished, there's more stock coming very shortly and with hindsight, I was offered a place in a new building before you know off the plan so to speak and it was eight thousand dollars a square meter. With hindsight, that's now worth it's actually now worth ten thousand dollars a square meter. But I don't see any more growth in the commercial property market here in Sydney it's done.

It's huge. You know, doubling or more of prices and it's plateaued and it's just going to sit like that. You know for the foreseeable future. I think if anything, it might drop a little bit as more stock comes online and I'm hoping for so over the next year I'm gonna sit there and wait for something around the 80 square meter mark.

So I don't you know 70 might do it? something like that? I'd You know if I found a good place at 70 square meters I'd probably had a good rate a good per square meter. So if I found it at six thousand dollars a square meter for example, I'd jump at that. So I've been like four hundred and twenty thousand dollars or something I would like I'd jump at that I think So yeah, it just depends on what comes up. So anyway, I'll keep you updated on that and as always, hope you found that interesting.

If you did, please give it a big thumbs up. As always comment and down below or over in the Eevblog forum just after I upload the video is when I'm keen and more keen to answer questions and stuff like that. So let us know. how is it different in your country? What's the going rate per square meter for a you know, an A-grade commercial office space in a nice commercial office building? and once again, I would not buy a place with its own amenities I don't want to clear my own toilet.

screw that, but man, maybe. But generally in this part of the park that I want everything is pretty much shared amenities, corporate office tower kind of thing and I was actually by the way. as an aside, I was actually considering buying a buying actually a house nearby a how like a residential house on its own local land and actually using that, converting that into an office and technically I might legally be allowed to do that the zoning laws because I can. it gets a little bit complicated, but because I'm not gonna have clients coming and going I wouldn't have big signs out the front I'm not a doctor or anything like that and and medical use and things like that.

So and really no one would know, right? unless the neighbors are complained that oh, I'm running this business from this house. You know if you're not living there, you're not allowed to do that well. I can put I could put a bed in there and say yeah I sleep here once a week. It doesn't say how often I gotta sleep there for it to be a residential place, Does it? Anyway, it gets a bit messy and it's actually you can buy a house for like $800,000 around like it's a small, rundown rundown place.

So then you own your own block a land. But I actually I I went away from that because even though I'm a bit of a loner, I do like doing this sort of stuff on my own I do actually enjoy being in a commercial office building here. You get to talk to other people and you know, share lifts and I can just wander out at lunchtime and you know it's it's just been stuck in some house in the middle of the burbs or whatever. It'd be just like home.

And by the way, those wondering why don't move back to the house know our house and our land just doesn't lend itself to having a, you know, an extra 50 square metres where I could work. We've already extended our house by the way. and because our house was pretty small by standards around here and we actually extended our house and but I can't we're using that for family use so I can't like commandeer that I'm not going to move back into the garage because Mrs. Eevblog has this weird notion that you parked cars in the garage catch you next time.