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This might be a stupid question but am new to developing.
My partner and I bought a parcel of land 600sqm for $235,000 all cash last year, current value is $300,000
house estimate is $130,000(we’ll use cash to build)
Houses in the area are selling for $475,000
what is our margin and how do we calculate it? Using current market value of land or what we paid for it? Build time is 12 months and we’re using a turnkey contractor as its the first projectFrom what I understand of it and I might be wrong, if after 3 properties with a value of $1,275,000 and mortgage of 780,000 you want to buy an additional 4th propery for 640,000, you might be stretching your finances too thin. The value of your portfolio would then be $1,915,000 of which $1,420,000 would be loans(assuming you borrow 640,000, and your equity in the portfolio would be 25%…not really enough to pay your mortgages unless your rental return was really fabulous, not the average 5-6% rental yield or you made a substantial downpayment to increase equity. That said, its doable.
As you’re new to this, it might be better to take it slow, get the 2nd and 3rd project going, ready and rented with cash flow coming in, after a year you’ll be able to assess what your net cash flow situation is. While things sound great on paper sometimes that projected weekly rent doesnt come in because of vacancies or other costs, and you wouldnt want to take on too many commitments and get in over your head.
If you have an accountant run all these senarios with him
Just my .02
Well, we already have properties in the UK, as well as current mortgages of 800,000(pounds). We plan to pay that off, and hopefully collect mid 6 figure rentals annually that would allow us to hopefully buy a property every year or two with no mortage. The focus is now on income with no debt obligations.
We renewed the lease retroactive from may 2005 to may 2006 at $1175pm. After inconclusive talks in person and on the phone I sent him a letter asking for $1350 or we would need him to vacate by August 30th. He’s been paying $875 so $1175 is acceptable and big jump for him. I have howver decided to let 2-3 months pass and then sent him a letter saying we will not be renewing the lease next May so he should make plans to vacate..interiors and fittings are his..I just want my hall of an office back.
Its been distateful..lesson learned, never rent to a friend. You end up learning things about them you’d rather not know.the company charge is the administration fee for the trust that owns these properties
What you’re saying makes sense, unfortunately I already tapped into the equity for 250,000 for another non property business venture, but did eventually buy another IP this year for 480,000, with 160,000 down. Projected income from that will cover the mortgage and costs and possibly a little cash in hand. At this point total mortgages combined are 800,000 with projected income under 5000. There is no leeway for significant vacancies as both properties are large, though rented. I guess I’m worried about risk. Would you recommend trying to pay back the 250,000 I took out, in order to reduce the mortgage burden?
