Forum Replies Created
Hey Sean,
I am guessing you have taken a position on the price of the house and you think this is worth pursuing for whateveryou investing reason!Here is what I do.
Once you are signed up with your 10-15 day due diligence clauses intact…
1. Grab the internet and goto http://www.yellowpages.com.au
2. Check out at least 3 realestate agents and get rental return inspections and also ask them what they think could be done around the place to possibly increase the rental return.
3. Get a price on those repriars /upgrades to establish your costs if you should decide to complete these recommendations.
4. Get a well referred property inspection company (try finding one through this site or the yellow pages).
5. get a full inspection report done with Digital photos to show al rooms and exteriors and good and bad points (unlike the real estate photos) – Typically $280-550 depending on locations
Evaluate your inforamtion and make a decision if you are to proceed or not.
This has a lot of risk … if you are not experienced with purchasing properties and looking over dozens of property reports …. as with experience you will see what the standard reports look like and the “alarm bells ringing” reports look like. Just because the report comes in unhealthy… does not mean to write off the deal… you have another negotaition point to discuss with the vendor/agent…. “photos speak a thousand words!!! and once you have shown an agent … they had to disclose these faults with any oher possible buyers as this is now a disclosed fault.
Anyway best of luck!
Cheers
KiwiHey there,
Great ideas!
A Couple of hurdles though.
Banks /lenders like to see proof of savings prior to lending funds.Unless you use a non conforming lender…
So the challenge is to find a private lender for deposits) that will sign a gifting declaration – which is hard to do…(although not impossible) unless you have another agreement signed up in the background like a JV for example. – Give them a share of hte projected returns …. share the wealth and you may get something accross the line.
My 2cents worth anyway.
“Money Follows Management”
Best of luck.Hey There,
If you do get an offer knocked back…. ask them when they li8st with an agency that they write in pen on the contract:
No fee or commission payable if sold to “your name, comany or agent of yours”Cheers,
KiwiHey there,
Just a suggestion, Get at least 2 independant property managers to go throug the property and get a rental appraisal and also see if there is anything that may allow an increase in rental return.
This will give you an idea of the worst case scenario that your tennant pulls the pin you are not left hanging off the lemon tree!
Cheers
KiwiCheers guys,
Any more info people?hey there,
A few questions to answer yourself
-Is the house priced below market?
– Are the sellers really motivated?
– How much cash are you putting up for option?
– Why can’t they sell in open market?
– Are you prepared to lose the option fee if you are unable to service the monthly repayments….remember that you have to create a win/win on both ends of the equation….sometimes we all forget that and the whole deal just turns to “<edited>e”……
You could always assign the option quickly if you have a really good strike price locked in on the option.
If it is not that good a deal… then I would just keep on searching…..
Like steve McKnight and Dave Bradley advocate:
1. How much in
2. For how long
3. What are the risks
4. How much returnCheers,
KiwiBut Most of all…… HAVE AN EXIT PLAN BELFORE YOU BUY!
Cheers
Kiwi1. Try to make sure you buy below market value … or at least at or just below median price of the area….
2. Look at current market and assess your position as to what he market is doing currently (Rising, Flattened or soft).
3. Assess your costs and realisitic realisation of your renovatoins in capital gain?
4. Work out your holding time and how much cash you need to inject into the project before you are likely to get a return.
5. Look at How much cash you will need and whether you can get all the renovations done prior to settling and perhaps even have it remarketed and resold before your loan is actually drwn down. – get an extended settlement with early access to complete renaovation and to market the property agreed to in your contract of sale with the vendor.Then consider:
– How much Cash in
– How long in for
– For what return
– assess risks
– Compare to other deal you have assessed
– take action – Walk or take the deal!
Just my opinions… take it or leave it … after all its FREE!
Cheers
KiwiHey There Happy Jack!,
Few things…. reaching an agreeable fee is like buying a house at the right price… it all comes down to an mutual agreement between buyers agent and purchaser (assignee)…. best thing to do is …. compare the market place and see what it has to offer and then compare the service(s) each ofers to the client…. Ease of dealing with and assistance are some things you may need to consider….
As for signing up an assignment…. you need to look at the contract first so that you can make sure you have the relevant conditions that give you time to check out the deal first ….. once you hae built a relationship0 withthe bird dog … they can usually do most of the checks with genuine due diligence professionals to show you that you are getting good value for money…
Most bird dogs will make you pay in advance for the right to sign over thier portion of hte assignment of the contract or option and this is not usually refundable… so if you pull out of hte deal…. they will keep your funds … however the genuine ones will allow you to roll the initial fee into the next deal that rolls of the assembly line and you will have first go at it.
Hope this helps you find the right team for your strategy. I buy them myself and if you are interested PM me for more information sharing.
Cheers
KiwiI just got 2 unconditional last week in NZ ……
Gross yields of
Prop #1 = PP: $79K — Rent $170/week
Yeild = 11.18%
Prop #2 =
PP: $95K— Rent $205/week
Yeild= 11.22%
I Like NZ for a number of reasons:
1. Great Place
2. From There … but now live in Sydney
3. No Stamps
4. Good LVR Leverage if borrowing locally from NZ lenders
5. Good Yeilds
6. No CGT (If your enitiy is structured correctly)
7. You can buy more for your buck (20% difference in exchange rate currently)
8. You can buy more houses for your dollar and spread your risk quicker across multiple houses rather than putting all your hard earnt dollars into one house and if it does not rent you are losing money.
9. legal and accounting system is simple in NZ for off shore investors and locals alike.
Good Luck and if you need a hand with anything then feel free to PM me!
Cheers
Kiwi[baaa]Hey Guys,
I have just gone unconditional on aonther deal similar only it is a single dwelling…. We did not know about hte roof at all and as far as the agent was concerned the house was in good nick aprat from a bit of floor vinyl in serious need of replacement. We did a full building report and the roof was absolutely stuffed!… so we hit them up for a discount and since we had the proeprty tied up under a 15 dowking day due diligence clause … they decided it would be better that they agreed to our discount as I sent a bunch of photos to hte agents also …. this means they cannot sell the house now without disclosing this now known issue!!!! Clever Aye!!
…..
Anyway we got a $15K discount off the asking price of $94K…..
Another deal had the same issue…. and we tried the same trick and they said no way… so we walked … better to pay a few hundred dollars and be prepared to walk …. than to pay too much for the property and then have to fix it also!
Cheers
KiwiNot enough fat in it for me.
only returning 8% yeild and you will haveto come up with at lest 30-40% of the buy price… I would keep looking and find a more attractive deal…. good spotting though. With commercial delas you could look at returns higher than 17% yeild as you have more of your cash invested in the deal.
Cheers
KiwiHi There,
It looks like you have the perfect cash cow already!If you look at the cashflow angle …. and do not want to haveto fund any of the borrowings out of your pocket, I would suggest.
Refinance completely to a maximum line of credit of $170,000This will give you a cash exposiure of 10.4% ($340×52 divided by $70000-current outstanding amount) thus you will not have any top up at all.
This will give you $100K of deposits if an when needed and you will only pay more per month if you use those deposits. And if you are going to use them of +Cashflow houses then you will have no further exposure.
This means you will not have to work harder as you build you portfolio and is a lot more conservative approach… then as you change or fine turn your investing engine…. you can alter your finances to suit.
Cheers
Kiwi!Hi Thre Elkam,
The IRR is a comparative tool to compare a property against a property and uses a very complex set of calculations.
The considerations to calcualte this are:
– Rates
– Purchase costs
– Renovation costs
– Maintenance
– Repairs
– Vacancy rates
– closing costs
– True market value
– Mortgage Application Fees
– Your income level
– Mortgage structure ( Interest only or P &I)
– Property management fees
– Prevailing taxation rates
– Expected capital gains rates
– expected inflation or rental and expenses.
AS you can imagine this would be an absolute nightmate to work this out on short or long hand…..
But hte good news is that there are programs out there that do all hte work for you once you have the data required.
PIA PRO is one and Dolf De Roos has another progarm call Property Magic I think.CASH ON CASH Return gives you a good snapshot at the time … however IRR gives you good future and present returns and can outline potential budget blowouts or scenarios such as what if the rent goes down?, what if the interest rates of the mortgage go up etc.
Cheers
KiwiHey Guys,
I prefer to lock in the rate and then set and forget… nothing worse than when you thoguth you had it all covered and then found the rates have increased to swing it from + to – cashflow!Anyway I suppose all courses for horses!
Cheers
KiwiHere is a suggestion you could try,
Let it at a lower than market rate say 20-25% lower to compensate for the inconvenience of all the works going on in the back yard…and give them the incentive that if they take care of it you will assist them with moving into another property if the need arises.Here’s another idea……
You can draw more equity out of your investment properties, buy more properties and use the cashflow from the positive cashflow houses to pay off your own home repayments …. You could then get a LOC on your PPOR and then only use the funds avaialable to buy only + CHFLOW properties. After all it is not so much about owning them … it is more about controling them and creating a lifestyle for yourself….
My thoughts anyway.
Cheers
Kiwi[baaa]
“It Won’t Happen Over Night …. but it Will Happen”Hey there,
Second registered mortgage still does not give any 100% assurances that hte vendor will get thier piece of the pie either… if the market slumps and the property loses sales value to a price below the outstanding debt…and the deal goes pear shaped and hte bank forecloses….. the registered 2nd mortgagee gets the crumbs if any AFTER the 1st registered mortgagee has taken all late fees and legals + the total payout figure.A caveat give the holder the right to enter a court hearing and delay proceedings untill thier case has been heard… in other words settlement can take place until the caveat has been lifted. – As far as I know….
WE have worked around solicitors detering thier cleints by just offering a copy of our spotless credit report and letting them know how serious we take this and if it did not work out we go totally in the black book of the bad debters….. lose all our houses …. I mean come on lets be realistic hear…. get them comfortable and they can reject thier solicitors advice and still win in the end … as if any of us want to be on today tonight in hte public eye heading the story of the week “Aussie Diggers Scammed out of thier house”…..
If you have a good system and keep a good eye on things you will find things just fall into place.AS for the 25% baloon payment…. I am not saying it would be impossible … however you need to think of hte vendor and how they would win out of this arrangement…. the more you address thier needs nad find solutions to thier problems… the higher the chance of success. Try not to get to creative first up as it my cause you to stumble and get confused on your own terms thus damaging your credibility as a seasoned investor….
Cheers
Kiwi [baaa]How about finding out how much cash the Seller needs to address his current financial challenges…. then you may be able to get a starting point so you know where you need to be to solve that part.
What you could do is this….
Offer the seller the cash to solve his problems and then lease option for 5 years or more on the property … offering to look after his re-payments in return for a consistant amount off the house price if (When) you buy it. Get the right to sublet and then rent it out.This way you:
1. Sort out their issues
2. Secure a house and can wait for it to appreciate in value
3. can sublet it out to cover your costs and more
4. could sandwich lease option it to increase the return and end profits.
5. can lease option for a higher price than you purchased for….
6. can find a buyer that will pay $310K or more and then assign them the option to complete transaction in 90 days……
7. You do not have to factore in Stamps duty if you flip it or Lease Option or assign it….
8. potentially get more profits.Cheers
Kiwi[baaa]I agree… the PM could be the issue here…… you may need to look into finding either a better motivated one …. or one that actually knows what they are doing. Ring around other agenst and find out hte average time fram good houses (similar to yours) is currently takeing to rent…. BUT FIRST ask them if they have any on the books, how much per week?… and how long have they been avaliable….
I would call twice…. first as a potential tennant called Scott… then as you the proeprty landlord looking for the right PM.
This wisll allow you to collaborate thier stories to see if theyare talking S@#T or not….. If their stories don’t match…. CONFRONT THEM! Find out why they are trying to pull the wool over your eyes!
Cheers
Kiwi
[baaa]
