West Auckland Light Industrial Property Analysis
Preliminary review of a commercial / light industrial property with two units or workshops, asking price of $750,000, and stated rental income of approximately $6,000 per month.
Used as the base price for debt, equity, and yield tests.
Assumed as rent excluding GST unless proven otherwise.
Before OPEX, vacancy, debt payments, tax, and capital costs.
Short verdict
This is worth investigating, but it is not a clean yes at $750,000 until the leases and outgoings are verified.
The deal works best if the $6,000 per month is true net rent, excluding GST, and if most outgoings are recoverable from the tenants. If the rent is gross, includes GST, or hides owner-paid costs, the purchase price should probably be lower.
Why these numbers are being tested
The goal is to test whether the property can carry itself under normal and stressed conditions, not just whether the headline rent looks good.
For a two-unit commercial property, the main risks are tenant vacancy, unknown owner expenses, commercial interest rates, and unexpected capital repairs. A deal that only works under perfect conditions is too fragile.
Plain-English terms
Market rent sense check
The stated $72,000 annual rent appears plausible for two medium to large West Auckland workshops, but only if the building size and lease structure support it. The exact floor area still needs verification.
| Market rent benchmark | Building area implied by $72,000/year rent |
|---|---|
| $148/sqm secondary net rent | approx. 486 sqm |
| $198/sqm prime net rent | approx. 364 sqm |
| $200/sqm prime net rent | approx. 360 sqm |
If bought outright: income before tax and CAPEX
If the property is bought without debt, the key question is how much income remains after normal operating costs. This does not include tax or major one-off repair costs.
| OPEX scenario | Estimated annual OPEX | Estimated annual NOI | Estimated monthly NOI | NOI yield on $750k |
|---|---|---|---|---|
| 25% | $18,000 | $54,000 | $4,500 | 7.20% |
| 35% | $25,200 | $46,800 | $3,900 | 6.24% |
| 45% | $32,400 | $39,600 | $3,300 | 5.28% |
Debt, deposit and repayment scenarios
These scenarios use 7.5% interest over 15 years on a principal-and-interest basis. Real commercial lending terms may differ.
| LVR | Debt | Equity / deposit before costs | Estimated annual debt payment | Estimated monthly debt payment |
|---|---|---|---|---|
| 30% | $225,000 | $525,000 | $25,029 | $2,086 |
| 40% | $300,000 | $450,000 | $33,372 | $2,781 |
| 50% | $375,000 | $375,000 | $41,716 | $3,476 |
Cashflow after debt at the asking price
This table shows estimated annual surplus after operating expenses and debt payments. The smaller line shows approximate monthly surplus or shortfall.
| OPEX scenario | 30% LVR | 40% LVR | 50% LVR |
|---|---|---|---|
| 25% OPEX | $28,971$2,414/mo | $20,628$1,719/mo | $12,284$1,024/mo |
| 35% OPEX | $21,771$1,814/mo | $13,428$1,119/mo | $5,084$424/mo |
| 45% OPEX | $14,571$1,214/mo | $6,228$519/mo | -$2,116-$176/mo |
Tenant and vacancy stress test
This is one of the most important tests for a two-unit property. Losing one tenant may remove about half of the rent if both workshops pay similar rent. The table below uses 35% OPEX and assumes operating costs continue even when rent drops.
| Vacancy scenario | Rent lost | 30% LVR | 40% LVR | 50% LVR |
|---|---|---|---|---|
| No vacancy | $0 | $21,771$1,814/mo | $13,428$1,119/mo | $5,084$424/mo |
| One unit vacant 3 months | $9,000 | $12,771$1,064/mo | $4,428$369/mo | -$3,916-$326/mo |
| One unit vacant 6 months | $18,000 | $3,771$314/mo | -$4,572-$381/mo | -$12,916-$1,076/mo |
| One unit vacant 12 months | $36,000 | -$14,229-$1,186/mo | -$22,572-$1,881/mo | -$30,916-$2,576/mo |
| Both units vacant 3 months | $18,000 | $3,771$314/mo | -$4,572-$381/mo | -$12,916-$1,076/mo |
Interest-rate stress test at 9%
This tests whether the deal still works if commercial borrowing costs increase or the loan is refinanced on tougher terms.
| OPEX scenario | 30% LVR | 40% LVR | 50% LVR |
|---|---|---|---|
| 25% OPEX | $26,615$2,218/mo | $17,486$1,457/mo | $8,358$697/mo |
| 35% OPEX | $19,415$1,618/mo | $10,286$857/mo | $1,158$97/mo |
| 45% OPEX | $12,215$1,018/mo | $3,086$257/mo | -$6,042-$503/mo |
Price guide by debt level
This table estimates the maximum purchase price that would support about 1.25x debt coverage, using 7.5%, 15-year principal-and-interest debt. It is not a valuation, but it helps show where the price becomes safer.
| OPEX scenario | 30% LVR | 40% LVR | 50% LVR |
|---|---|---|---|
| 25% OPEX | $1,294,481 | $970,861 | $776,689 |
| 35% OPEX | $1,121,884 | $841,413 | $673,130 |
| 45% OPEX | $949,286 | $711,965 | $569,572 |
What would make this deal stronger
- Rent is confirmed as excluding GST.
- Leases are net leases with outgoings recoverable from tenants.
- Both tenants are stable, current, and on documented leases.
- There are rent reviews, rights of renewal, and no arrears.
- Building report shows no major roof, drainage, electrical, fire, or structural issues.
- Rent is at or below market, leaving a realistic rent-growth path.
What could make this too risky
- The $6,000/month includes GST or includes tenant outgoings.
- One tenant pays most of the rent or has a weak business.
- Short leases, informal leases, arrears, or poor tenant history.
- Large CAPEX exposure, especially roof, drainage, fire compliance, asbestos, or seismic issues.
- Bank valuation comes in lower than the asking price.
- Outgoings are not recoverable and true OPEX is closer to 45%.
Next information needed before relying on the numbers
Final working position
At $750,000, the deal is most comfortable around 30% to 40% LVR until OPEX and lease quality are verified.
At 50% LVR, it only looks sensible if the true landlord OPEX is low, tenant quality is strong, and there are no major capital repairs waiting. The real question is not whether the rent looks high. The real question is whether the net income survives vacancy, commercial debt terms, and unknown property costs.