- Net vs gross lease
- Under a net lease the tenant pays outgoings on top of rent — the norm for industrial and standalone commercial. Under a gross lease outgoings are built into the rent. Always confirm which applies before comparing two properties on rent alone.
- Outgoings
- Council and water rates, land tax, insurance, and building maintenance. On a net lease these are recovered from the tenant, so they materially change both the tenant's real cost and the owner's net return.
- Net yield
- Annual net income (rent less non-recoverable costs) divided by the purchase price. It's the primary measure of a commercial investment — a $2m building on 6.5% net returns roughly $130,000 a year before finance.
- Lease term & options
- Commercial leases typically run three to five years with further option periods the tenant may exercise. Longer terms with strong covenants generally support a sharper yield on sale.
- Rent reviews
- Increases are set in the lease — commonly a fixed percentage, CPI, or a market review at option. The review mechanism has a direct effect on long-term value.
- Zoning
- South Australia's Planning and Design Code determines what a site may lawfully be used for. Confirm the zone and any consent conditions with the council before committing — permitted use drives both value and financeability.
- Make good
- The tenant's obligation to return the premises to an agreed condition at the end of the lease. Scope varies widely and is worth negotiating at the start, not the end.
- GST
- Commercial rent and sales generally attract GST, though a tenanted property sold as a going concern may qualify as GST-free. Structure affects cash flow at settlement — worth confirming with your accountant early.
General information only — not financial, legal or taxation advice. Seek advice specific to your circumstances before acting.
