Lane 03 · Commercial

In commercial, the lease is the asset.

Residential buyers buy buildings. Commercial investors buy income streams, so I grade the income before the building, price the lease instead of the listing, and never take the selling agent's word for value. Client-side commercial buyers agents are rare. That's the point.

See The Deal Grade™Book a strategy call
4–7%net yield target range, real net after outgoings
A1–C3every property graded before it's priced
+$900Ka value-add project I led: Dry Creek SA, 22 months, plans not bricks. Receipt 03

The system

The Deal Grade™

Two grades, one verdict. The building is graded A to C on the physical asset: age, construction, clear height, power, location. The income is graded 1 to 3 on the lease, because that's what you're actually buying.

Income 1strong lease
Income 2workable
Income 3weak / vacant
Bldg A
A1
A2
A3
Bldg B
B1
B2
B3
Bldg C
C1
C2
C3
Buy zone Value-add only, repriced Walk

The buy zone is A1, A2 and B1.

B2, A3 and C1 are value-add plays only, and only at a price that pays for the risk. Everything else, we walk.

Why it matters

The selling agent grades every property A1. I grade maybe one in ten that way, and I show the workings, criterion by criterion, before you offer a dollar.

If the grade doesn't say buy, the price doesn't matter.

The income grade

Six things the listing won't tell you about the lease.

WALE, weighted by incomeFour-plus years is a 1. And I weight it by income, not just years: a five-year average where 80% of the rent expires next year is a 3, whatever the brochure says.
Tenant covenantNational, ASX or government tenant, or a genuine multi-tenant spread, grades 1. A single fragile tenant grades 3, no matter how nice the coffee shop looks.
EscalationsFixed 3%+ or CPI-plus annual increases grade 1. Market-review-only escalations are a promise, not a number.
Net vs grossA true net lease, where the tenant pays the outgoings, grades 1. A gross lease means you wear every cost increase for the term.
Rent vs marketAt or under market grades 1: there's reversion upside built in. Over-rented grades 3; that's an income cliff dressed as a yield.
Incentives and vacancy riskHeavy incentives washing through the rent mask what the space really earns. I strip them out before the yield gets quoted.

The method

Precinct. Grade. Price.

01

Precinct: sector and timing first.

Property clock position by asset class, precinct supply, tenant demand depth, infrastructure. Office, retail and industrial move on different cycles; buying the right asset in the wrong phase still loses.

02

Grade: the Deal Grade matrix.

Building A–C against the published grading criteria. Income 1–3 against the six lease tests. Only buy-zone deals proceed to pricing; most don't.

03

Price: the lease, not the listing.

Term and reversion valuation for anything under- or over-rented. Cap-rate comps from settled sales, not agent guides. A 10-year cash flow with NPV, IRR and vacancy scenarios. The offer is anchored to these numbers, never to the guide.

The three value levers

Upside the listing agent won't model for you.

Because they work for the other side. Every appraisal I run quantifies all three.

01

Covenant upgrade

Same rent, stronger tenant, compressed cap rate. The signature on the lease can be worth more than the building works.

Example: $100K rent re-rated from a 6% to a 4% cap adds $833K of value.

02

Reversion capture

Buy under-rented, reset to market at expiry. Term and reversion pricing means you pay for today's lease and keep tomorrow's upside.

Example: $100/m² passing vs $150/m² market on 510m² is a $425K capital gain at reset.

03

Lettable area

Mezzanines and NLA expansion, valued per square metre. The cheapest floor space you'll ever buy is the air inside your own building.

Example: a 50m² mezzanine at $3,250/m² adds $162K of value.

What you get

Deliverables that stand up against the sell side.

Deal Grade scorecardBuilding and income grades with the workings shown.
Independent appraisalTerm and reversion plus cap-rate comps, not the selling agent's opinion of value.
10-year cash flowNPV, IRR, vacancy sensitivity, incentive drag, exit value.
Lease review memoWALE by income and by area, escalations, recoverability, incentive audit.
Value lever assessmentCovenant, reversion and NLA upside: quantified, not implied.
Offer pack and executionNegotiation anchored to the numbers, settlement coordinated. SMSF-commercial structures flagged to your adviser.

The fee

Engagement fee plus a success fee on settlement.

$5,000 + 2%

$5,000 engagement, 2% success fee inc GST on settlement. Commercial searches vary wildly in length; the structure reflects it.

The Deal Grade and full pricing stack are free on your strategy call. Bring a listing and leave with the grade, the appraisal logic and the ten-year numbers, before you commit to anything.

  • Precinct and property-clock timing analysis
  • The Deal Grade on every candidate
  • Term and reversion pricing, cap-rate comps, DCF
  • Off-market access through agent relationships
  • SMSF commercial, including related-party premises

The proof

TenSixteen Business Park render
Commercial · Receipt 03+$900K

The shed on 8,928 square metres. My money in the deal, my method on the numbers.

The income graded strong enough to carry the hold; the land was the real asset. Bought $3.85M with two partners, masterplanned 13 warehouses as TenSixteen Business Park, onsold $4.75M before the DA was lodged.

Read receipt 03 on the results page →

Free · five minutes

Think commercial is out of your league? Take the Ready Check.

Most residential investors assume commercial starts at $5M and ends in vacancy horror stories. The Commercial Ready Check tests what actually matters: usable equity, lending position, income needs and risk comfort, then tells you straight whether commercial fits your next move.

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Ready nowCloser than you thinkBuild first

The other lanes.

Lane 01Residential investmentPost-2027 modelling, pocket-level precision. Lane 02SMSF propertyFund first. Compliance pre-flight before the search. Lane 04Development sitesOff-market sourcing, Feaso Filter™ discipline.

Bring the listing. Leave with the grade.

A strategy call is 30 minutes. The Deal Grade, the appraisal logic and the ten-year numbers are free either way. If it's a walk, I'll tell you before the sell side charges you for finding out.

Book a strategy call