Property Council Underwriting Review
43A Linwood Avenue, Mt Albert
Preliminary review of a commercial / light industrial workshop property using current rent information, conservative OPEX assumptions, commercial debt tests, tenant-vacancy stress, CAPEX risk and buyer-price sensitivity.
$750k
Vendor price discussed
$5,682.51
Monthly rent incl. GST and OPEX
$4,941
Approx. monthly ex-GST before OPEX split
Caution
Current buyer verdict
Short verdict
Do not buy at $750,000 on the current numbers. This may still be worth investigating, but the income presentation is too weak and unclear to support the stated price under conservative underwriting.
The key issue is that the lease amounts include GST and OPEX. That means the true base rent is lower than the headline number, and we still need the lease schedule and outgoings split before relying on the numbers.
Plain-English terms
| Term | Meaning |
|---|
| LVR | Loan-to-value ratio. A 40% LVR on $750,000 means $300,000 debt and $450,000 equity before costs. |
| OPEX | Operating expenses. Examples include rates, insurance, management, maintenance, body corporate costs, vacancy allowance, and unrecovered outgoings. |
| NOI | Net operating income. Rent left after OPEX, before debt, tax, and major capital works. |
| CAPEX | Capital expenditure. Larger one-off repairs or upgrades, such as roof, drainage, roller doors, fire compliance, electrical, asbestos, or structural work. |
| DSCR | Debt service coverage ratio. A lender-style measure showing how comfortably the property income covers loan repayments. |
| P&I | Principal-and-interest loan repayment. The loan balance reduces over time, but the monthly payment is higher than interest-only. |
Facts, assumptions and missing information
| Category | Details |
|---|
| Facts known | Two leases paying $2,911.75 and $2,770.76 per month. Combined $5,682.51/month including GST and OPEX. Vendor is stated as willing to sell for $750,000. |
| Assumptions used | GST removed at 15%. OPEX tested at 25%, 35%, and 45%. Base debt model uses 7.5%, 15-year P&I. Debt tested at 30%, 40%, and 50% LVR. |
| Major missing information | Exact title/unit, full leases, base rent vs OPEX recovery split, actual outgoings, lease expiry, renewal rights, arrears, tenant quality, body corporate costs, rates, insurance, building condition, GST sale treatment. |
| Red flags | Rent includes GST and OPEX, two-tenant concentration, possible older industrial building, unclear true recoveries, thin surplus at $750k, vacancy risk. |
Market and property context
Public records and listings indicate 43A Linwood Avenue is a multi-unit light industrial/workshop complex. However, the exact legal unit, floor area and title must be confirmed before relying on CVs, prior sales, or rates.
Current Auckland industrial context is still useful, but it does not override the specific lease and income risk. JLL and Colliers both show Auckland industrial vacancy has moved up from the tightest period, and market rents vary by grade, location, size and quality.
GST and OPEX issue
| Item | Amount |
|---|
| Lease 1 rent incl. GST and OPEX | $2,911.75 / month |
| Lease 2 rent incl. GST and OPEX | $2,770.76 / month |
| Total incl. GST and OPEX | $5,682.51 / month |
| Approx. ex-GST total before OPEX split | $4,941.31 / month |
| Approx. ex-GST annual amount before OPEX split | $59,296 / year |
The ex-GST amount still includes OPEX recovery. OPEX recovery is not the same as base rent. Until the lease schedule is split into base rent, outgoings recovery and GST, the true landlord net income remains uncertain.
If bought outright
If bought without debt, the question is how much income remains after operating costs. This excludes tax and major one-off repairs.
| OPEX scenario | Estimated annual OPEX | Estimated NOI | Monthly NOI | Yield on $750k |
|---|
| 25% | $14,824 | $44,472 | $3,706 | 5.93% |
| 35% | $20,754 | $38,542 | $3,212 | 5.14% |
| 45% | $26,683 | $32,613 | $2,718 | 4.35% |
At 35% OPEX, the property produces about $3,212 per month before tax and before major repairs. That is modest for $750,000 of capital.
Debt, deposit and repayment at $750,000
| LVR | Debt | Deposit/equity before costs | Monthly P&I at 7.5% | Annual P&I |
|---|
| 30% | $225,000 | $525,000 | $2,086 | $25,029 |
| 40% | $300,000 | $450,000 | $2,781 | $33,372 |
| 50% | $375,000 | $375,000 | $3,476 | $41,716 |
Equity/deposit before costs is not the full cash requirement. Allow for legal, valuation, lease review, GST/accounting advice, building inspection and reserves.
Cashflow after OPEX and debt
| OPEX | 30% LVR | 40% LVR | 50% LVR |
|---|
| 25% OPEX | $1,620/mo | $925/mo | $230/mo |
| 35% OPEX | $1,126/mo | $431/mo | $-264/mo |
| 45% OPEX | $632/mo | $-63/mo | $-759/mo |
At $750,000, 30% LVR is the only comfortable debt case. 40% LVR is marginal under the middle OPEX case. 50% LVR is not suitable on current income.
Stress tests
Rate sensitivity at 40% LVR
| Interest rate | Monthly P&I on $300k debt | Monthly surplus at 35% OPEX |
|---|
| 5.5% | $2,451 | $761 |
| 6.5% | $2,613 | $599 |
| 7.5% | $2,781 | $431 |
| 8.5% | $2,954 | $258 |
| 9.0% | $3,043 | $169 |
Tenant vacancy stress
This table uses 35% OPEX and 40% LVR at $750,000.
| Vacancy scenario | Estimated NOI after vacancy | Monthly surplus at 40% LVR |
|---|
| No vacancy | $38,542 | $431/mo |
| Larger tenant vacant 3 months | $30,946 | $-202/mo |
| Larger tenant vacant 6 months | $23,351 | $-835/mo |
| Larger tenant vacant 12 months | $8,159 | $-2,101/mo |
| Both units vacant 3 months | $23,718 | $-805/mo |
| Both units vacant 6 months | $8,894 | $-2,040/mo |
At $750,000 and 40% LVR, a larger tenant vacancy for only 3 months turns the deal negative.
CAPEX stress
| CAPEX event | Effect at 35% OPEX and 40% LVR |
|---|
| No CAPEX event | +$431/month surplus at $750k |
| $25,000 repair | Wipes out almost 5 years of annual surplus at $750k |
| $50,000 repair | Wipes out almost 10 years of annual surplus at $750k |
Council lens review
| Lens | Council view |
|---|
| Deal underwriter | The income does not support $750k cleanly. Outright purchase produces modest income. Debt at 40% LVR is marginal. Debt at 50% LVR is not acceptable on current numbers. |
| Lender / broker | The bank will focus on ex-GST base rent, lease term, tenant strength, arrears, valuation, and borrower strength. Current DSCR is thin at 40% LVR and poor at 50% LVR. |
| Property manager | Two tenants means concentration risk. Tenant history, arrears, lease expiry, rent reviews, and re-letting appeal matter as much as headline yield. |
| Maintenance / CAPEX | Older industrial units can hide roof, drainage, electrical, roller door, fire, asbestos, and body corporate/common-area costs. The current surplus does not leave much room for shocks. |
| Legal / council / tenancy | Need exact title, lease review, LIM, zoning, consents, fire compliance, OPEX recovery clauses, GST treatment, and going-concern advice. |
| Family-risk lens | Do not risk household stability for a marginal commercial asset. If bought, it needs low debt, lower price, and reserves. |
| Skeptic | The $750k price looks more like a seller number than a buyer income number. CV/location should not override weak income. |
Same income, different purchase prices
This is the clean buyer view. The income is the same. The property is the same. Lower price means lower debt, lower repayments, higher surplus, better DSCR and better risk buffer.
| Purchase price | Debt at 40% | Deposit/equity before costs | Monthly debt payment | Monthly surplus | Annual surplus | DSCR |
|---|
| $750,000 | $300,000 | $450,000 | $2,781 | $431 | $5,170 | 1.15x |
| $650,000 | $260,000 | $390,000 | $2,410 | $802 | $9,619 | 1.33x |
| $600,000 | $240,000 | $360,000 | $2,225 | $987 | $11,844 | 1.44x |
| $550,000 | $220,000 | $330,000 | $2,039 | $1,172 | $14,069 | 1.57x |
| $500,000 | $200,000 | $300,000 | $1,854 | $1,358 | $16,294 | 1.73x |
| $450,000 | $180,000 | $270,000 | $1,669 | $1,543 | $18,519 | 1.92x |
| $400,000 | $160,000 | $240,000 | $1,483 | $1,729 | $20,744 | 2.17x |
Buyer price zones
| Purchase price | Buyer view |
|---|
| $700k to $750k | Weak. Hard to justify from current income unless hidden details are much better. |
| $600k to $650k | Only worth discussing if leases, recoveries, and building condition are clean. |
| $500k to $600k | More sensible buyer range based on current income. |
| $450k to $500k | Strong buyer range if building and legal risks are acceptable. |
| Below $450k | Very strong income position, but seller acceptance may be unlikely unless there is urgency or hidden risk. |
A defensible lowball range would be around $500,000 to $550,000, subject to lease review, outgoings verification, building inspection, finance, valuation and GST/legal review.
Final coordinator verdict
Do not buy at $750,000 on the current numbers. This may become interesting only if the true base rent is better than it appears, most outgoings are recoverable, leases are strong, tenants are reliable, the building is clean, and the price comes down materially.
| Key checks before any offer |
|---|
| 1. Confirm exact legal unit/title and floor area. |
| 2. Get full leases, expiry dates, renewal rights, rent reviews, arrears, bonds/guarantees. |
| 3. Get base rent vs OPEX recovery vs GST split. |
| 4. Get actual outgoings for the last 2 to 3 years. |
| 5. Review body corporate/unit title costs and minutes if applicable. |
| 6. Check rates, insurance, building report, roof, drainage, electrical, roller doors, fire compliance, asbestos, and consents. |
| 7. Confirm GST sale treatment and going-concern status with lawyer/accountant. |
| 8. Ask broker whether lending is realistic on the actual leases and likely bank valuation. |
Next 3 actions
| Action | Purpose |
|---|
| Ask for lease/outgoings pack | Confirm true base rent, OPEX recovery, expiry, rent reviews, and arrears. |
| Confirm exact unit/title | Avoid relying on the wrong CV, floor area, rates, or public property record. |
| Run broker and building checks before pricing seriously | Confirm debt realism and CAPEX risk before offering more than a heavily conditional low offer. |
Disclaimer: This report is preliminary property analysis for discussion only. It is not financial advice, lending advice, legal advice, tax advice, or a registered valuation. Figures are estimates based on limited information and must be checked against professional advice and source documents.