Interest on New Starts buying a facility (3-4 Companies)

retenzo12

With rising commercial rents and increasing property prices, I was just throwing the feelers out to see if there be much interest in a few of us "new startups" buying a property (obviously solicitor etc would be involved) and dividing the property out equally with shared communal areas such as toilets, canteen etc....and management fees!!

I personally would require approx 30-40m2 so would be looking at something 120m2 - 160m2


Ideally on the North Side of Dublin.


My budget would be 30-40K for such facility.

Has anyone ever looked at this before or would anyone have any interest in pulling this together and eliminate "dead rent"?

pedroeibar1

Recipie for a disaster IMO. Not financially realistic as €100-150k would not buy much and I could not see any bank financing it. What happens if one of the four is put into administration/liquidation?

retenzo12

Obviously this is why we would have a solicitor involved - if it was a runner we would make provisions for such scenarios, my train of thought would be that each company would secure the finance themselves as a business loan or through their own cashflow to purchases the premises.

pedroeibar1

A solicitor being involved is a basic for any property transaction, so your point is strange/irrevelant. Also, IMO any solicitor (other than one very greedy for fees) would steer you away from a transaction like this. How could the four business loans (which it would not be, as it’s a property purchase loan) be secured? How could anyone envisage four different banks sharing parri-passu charges on one property? One borrower defaults, how does the bank realise its security? (Judgement against the defaulter, enforce it through the forced sale of the building share – how and to whom?) Yes any agreement would require first right of refusal to the others, but could you afford to buy out another 40 k in a year or so?

Why is it that many Irish people view ownership of a building as a necessity? Why is rent regarded as “dead money” when it simply is an operating cost like wages. Concentrate on building your business, not on trying to make a capital gain.

It’s an unworkable idea as presented.

retenzo12

pedroeibar1 wrote: »

A solicitor being involved is a basic for any property transaction, so your point is strange/irrevelant. Also, IMO any solicitor (other than one very greedy for fees) would steer you away from a transaction like this. How could the four business loans (which it would not be, as it’s a property purchase loan) be secured? How could anyone envisage four different banks sharing parri-passu charges on one property? One borrower defaults, how does the bank realise its security? (Judgement against the defaulter, enforce it through the forced sale of the building share – how and to whom?) Yes any agreement would require first right of refusal to the others, but could you afford to buy out another 40 k in a year or so?

Why is it that many Irish people view ownership of a building as a necessity? Why is rent regarded as “dead money” when it simply is an operating cost like wages. Concentrate on building your business, not on trying to make a capital gain.

It’s an unworkable idea as presented.

To pick up on what you have stated -

Firstly - With regards the loan - banks offer in excess of 30K as a business loan, obviously a property loan could not be taken out against this giving the circumstances - so we are agreed here in some respect

Secondly - It is not a necessity and I never stated it was. If we are to get technical; it is a luxury and will subsequently minimise overheads in the long term and help to progress the business's future in in terms of securing loans, stability, saving on overheads, etc, etc, etc


There are a number of enterprise centres set up which facilitate 4-10 companies in one building and this idea would be no different with the exception of buying out the property and in lieu of paying rent you would be paying a business loan / alternatively saving on rent and have an asset after circa 10 years on.

As I have stated it is an idea at the moment to gather interest, much further detail and exploration is required later.

The only thing which appears to be unworkable is the negative attitude you have put forward ;-)

Graham

I think you're going to struggle OP. I'm not sure there are many "new startups" with either a spare €40k knocking around or access to (additional) finance of €40k.

Sorry to add to the negativity but I'm not convinced it makes sense financially. The sort of property you'd be able to acquire for €160,000 is likely to rent for around €12k p.a., split that 4 ways and you're only talking about 'saving' an annual rent of €3k. I certainly wouldn't want to tie up €40k to save €3k a year. I'd anticipate most startups would expect to see a better return from investing the €40k in their core business.

Have you investigated the tax/accounting implications of owning rather than renting? Have you looked at the legal costs of setting up a fairly convoluted shared-ownership agreement? Have you discussed this with your accountant? I know you're just testing the water but it would certainly help your cause to complete your initial investigations before making a decision or seeking out partner companies.

pedroeibar1

Why call it negativity? It's realism.;)

pedronomix

Startups with cash to invest in property or the capacity to borrow it for such purposes, whatever next? Can really see VCs lovin' this. Misguided, certainly....daft, probably!

Mrs OBumble

So you would risk your startup losing its premises because one of the other three (or so) went under? Really?

If you want space in an enterprise centre, then go and sign up with one. Otherwise work on your own business.