Forum Replies Created
I should add that while I admire Montrose's win or be dammned valour, it was that spirit that when misfortune ( and employee negligence) arose meant I lost everything and now have to start again.
I should have listened more to the I Ching ( Chinese Book of Change) where some ancient sage wrote:
"Thus, the Superior Man, taking thought of future misfortune, arms himself against in advance"Happy Hunting
Hiya QuickChick,
Please don't get me wrong, I don''t seek to avoid risk, on the contrary, the excitement of calculating risk vs return, and then seeking the strategies to mitigate or eliminate risk is what makes life exciting, whether in work, love, rest or play.
Personally, I love Montrose's Toast as a testament to bold spirits going forth . . .
I simply meant that while I love blackjack at the casino, you'll find me at the $10 table rather than the $100, even if I'm ahead of the house by 500% my original stake.
I have no passion for huuuuge gambles, although I admire those who do. ( That's how we got mankind to the moon) but for me, modest wins are sufficient.
Regards to all
Andy
PS: Montrose's Toast . . . .
He either fears his fate too much.
or his desserts are small,
Who dares not put it to the touch
and Win, or lose it all.The 5th Earl of Montrose
1612 – 1650
A Royalist General during the English Civil WarHi Angel,
I appreciate your feedback on the scenario I proposed.
Especially from someone with the "cojones" to take on a deal like yours, it underlines the soundness of my thinking.I have to admit though, having been burned financially in the past due to reliance on others ( hence my need for assistance to put a PPOR deal together to get started) I wouldn't be able to sleep at night for the next 5 years till the deal was concluded, my liabilities covered, and my after tax profit banked.
When I was young, my mom taught me to never gamble more than i can afford to lose. The one period of my life when I forgot that advice and didn't establish "stop-loss" positions and protections, left me exposed to misfortune and when it came, I lost everything.
I wish you every success with your deal – really I do….. but let me assure you that I will never be a competitor…..I've lost my appetitie for large lunches. Hehehehehe.
regards
Andy
Hi Paul & Karen,
Could you please explain the higher price / blind option mechanism.X wants to buy a house but cant afford it. Y comes along and offers to buy the house, let X rent it, and pay extra above the rent to buy equity deposit until it can be refinanced through the banks.
So X gets a lease, and an option ?at a higher price?
blind option ?
help
Andy
Hi Folks,
The refindhouses.com.au site listed in xdrew's post is excellent. I had no idea thes ewere around so thanx very much for the info.Really, really, useful stuff.
regards
Andy
OOOPS !
My sincere apologies MATT, I was so focused on typing I didn't read your name properly.
(unforgiveably bad form screwing up a man's name – shows no respect)
SorryAndy
Hi Mark (Fully)
Yep. . . you got it nailed.
The issue for us is that while we can service a loan right now with payments of up to $650 – $750 per week, particularly if we are able to owner occupy while doing the renovations ( makes it easier to work afternoons, evenings and weekends around the property so its quicker too) we have just put our available investable cash into purchasing the 2 lot acre of land.
The land was cheap, scenically attractive, and economically future prosperous for either rental or future sale. I don't regret buying it even though it is too far away from where we live to be suitable for us to develop a family home on it. ( I have 3 children and they are well settled in H.S / P.S and community organisations – St Johns Ambo / Rep Sports etc to move out of the area)
The result is that we have only a few thousand in savings at this time and no debt ( literally, no credit cards, pers loans or other debt.- we own our cars, boat etc).
After being out of the property market for the past 3 1/2 years after moving from Sydney to the quiet of the far sth coast, we now are ultra impatient to get off the rental treadmill and stop paying damn near $20k a year to the Landlord.
( here's a funny thing – the trigger for our impatience was we met the Landlord – lovely bloke, very funny and friendly – BUT we found out he's an Italian fruit grower from nth victoria who, along with his two sons, now own 23 properties around Victoria, NSW and Sth Australia.
23 !!TWENTY THREE !!
Bugger !
So, instead of sticking to our savings plan for another year to 18 months, I began to investigate how we can try to speed up the process.
We know we can pay a mortgage (we have before very successfully) but without 20% deposit (at least 12-18 months away), we cant access bank or non-conforming lenders.
Both my wife and I work in F/T employment, and we have a sales & distribution business selling caravan & camping products as well that brings in some very tidy cash proceeds.
Anyway, I began to search for low cost easy entry properties that satisfied 3 criteria:Ability to live in while renovating / rebuilding ( to allow rent money to cover interest or building costs)
Significant capital gain within a short timeframe (< 3 years)
Low enough purchase cost to enable interest / finance costs to remain low enough to allow us to purchase equity / maintain savings without hardship or stress. Remember, we need to pay interest to the finance, and have enough money left over to pay for the renovations and capital improvements that provide our equity and the financier's security ($350pw easy – $450pw requires planning& discipline – $550pw requires 2nd job and sale of 1 child )Later, I realised that to an extent that doesn't inhibit our own goals for equity value, I need to share the profits of the project with an investor to ensure that his (or her) risk is suitably rewarded so that also narrowed the potential property field a bit.
So far, this is the only project that meets all the criteria and is less than $200k.
How the deal is structured will depend a lot on the investor / finance provider. They may have capital gains tax issues, they may want a loss on paper, they may have the cash, or they may borrow it from a source. Loan to (or from) a trust, a company, an individual. Caveat on the property, registered charge over company, guarantee on individual, some or none. ???? and ?
As you see structure is less important than project objective agreement – we get 40 – 60% equity in a house, they get rewarding profit and we ALL feel good at the end. (After all – what's the point of anything if the "love" isn't shared hehehe)
Interested to know how you would structure it and how you think we could approach it.
regards
Andy
It's interesting to read through the posts and notice that the most emphatic points are to increase the value of the property either by buying astutely ( negotiate HARD) and then reno to increase attractiveness. The increased capital value will result in increased rental yields further supporting an increased valuation.
It seems so much like common sense yet in many of the other threads, many of the investors are ONLY focused on CF+ investments.I agree that the best investment is one that you can rapidly add value to with a resulting increase in market value (thereby increasing your equity value) AND that can be well serviced in terms of rapid repayments, ideally generated by increased CF+ rental income.
I urge anyone reading this thread to pay close attention to Ian's post ( Sapphire 101)
Happy trails
Hi Folks, some feedback on a deal I'm working on is needed . . .
There's a 4 bedroom house that has been tenanted and neglected (and some damage) over the past 5 years of rental.
The owner has put it on the market at $195,000.Generally, in this part of the sth coast, 4 bedroom homes within major towns rent for $300 to $350 per week and are valued at $280k to $350K even without a unique selling characteristic. Throw in views of the ocean or pasturelands and you can add considerably.
The reason for the cheap listing is that virtually every room requires renovation. The kitchen & bathrooms are all original and over 20 years old (prob closer to 30)
Every room has plaster damage, stained carpet etc.
I am confident that the property could be purchased for possibly as low as $180K with a quick settlement but even at full cost of $195 it is a good buy.
It is the worst house in the street, other properties are owner occupied and street / house proud. It offers ocean views (approx 2 kms away) and scenic bushland. The land is relatively flat and lawn/landscaping/gardens are easily added to improve street appeal. ( no rocks, boulders or protected bush habitats)
My calculations are that with much less than $40k of work, the property should revalue at around $300k+ or higher.
Because we are already committed to purchasing an acre elsewhere in July, we cant divert our savings from the land, to put down as a deposit to purchase this one. (We are unlikely to meet the bank's T&C or the LMI)
However, given that we have good incomes of around $80 – 90K pa ( by country standards) with no debt (own our cars, boat etc) and if we were owner occupying the property we could pay $750+ per week towards a mortgage./ finance deal if we needed to in order to "buy" equity and secure the deal.
So, if we offered the vendor 2 years interest only payments at 7.5% ( based on 180k purchase) = $13,500 pa ($1,125pm)
and
10% deposit ($18,000) payable by December 31st, 2011
and
Vendor's Equity in capital appreciation of $25,000, payable at time of settlement (plus the $162,000 balance)= $211,975 at settleement on a $180k property purchase then worth over $300K
Is that a good offer that would be attractive to an investment property owner willing to let us have an extended settlement or lease to buy option ?
If required, the interest can go higher and the CG share too and we still come out on top within 24 months.
The idea is of course that over the two years, we use our strong cash flow to fully renovate and improve the property, as well as saving a larger deposit, so that when we approach a bank / lender in 18 months to 2 years, we have significant equity, as well as a cash deposit, to ensure the loan to pay out the vendor is approved.
Keen to know if its any good, or which parts need to be improved.
For the investors out there looking for cash flow positive investments, does this kind of "wrap / vendor finance" deal apply ?
This is a post I put on this forum elsewhere recently and on reading the past 5 pages of this thread, i realise the people on here are the ones I need to talk to.
Our plan is to build a portfolio of 3-5 properties over the next 7 years but our start is proving more difficult than expected (We're ready but the access to finance isn't).
The acre we have bought is in two 1/2 acre lots and ready for modest development to return rentals of about 11% p.a. on each. More importantly, they will provide a C.G of around $120K each within 12 months of commencement.
However, the first step is the important one and this property will provide us with an owner occupied home for our family, significant equity value to finance the other future deals, and ultimately, it will make a solid I.P. in its own right (5 +years later)We just need someone to help us get into it.
I leave it here for your comments.
Andy
[email protected] (if you think you can steer us to success)Hi Matt,
I agree with the positives of the other posts, It is good that you've decided to secure your future and while you may think your starting late, it's still 7 years earlier than I did so i respect your ambition all the more.
I also agree with the posit that you are better off looking for 2-3 smaller deals that provide strong cash flow and positive loan serviceability rather than larger ones that, if Murphy's Law strikes, will prove difficult to repackage to protect your equity and "sweat".
I know, I lost a huge amount by being negatively geared into 2 properties in Sydney that when income /finances hit a crisis, we didn't have the neccessary speed or flexibility to protect our interests. Options open to us were limited.
Anyway, just a thought . . . I have posted a deal structure i am looking at elsewhere on this forum ( Investment Finance Deal) a couple of days ago. I wanted to run it past the more experienced heads on here to see what they thought. Perhaps you should have a look at it. It would offer you ( as investor / wrap vendor) positive loan servicing cash flow, security, and a cash bonus on completion by way of capital gain sharing. Basically, $175k in and around $210 – $215k (negotiable) out in roughly 18 months.
I'd be interested to hear what you think
Either way, it's important to start your long term financial security as early as possible so don't hold back, in the long run, there will always be profits in putting a roof over someone's head.
Regards
Andy
Hi Alf 1 (Anthony)
Firstly, thank you for getting the forum handle joke, ( I was worried about obscurity).
Based on what you said about it only works if the Vendor is interested, I figured the best approach was to submit the offer, showing the benfits to the Vendor, and then hope he (a) agrees with the benfits and finds them desirable, and (b) is in a situation where they can wait for full payment rather than requiring an immediate sale and settlement.
You suggest finding (b) vendor then discussing (a) to reach agreement.
I suspect that may be very hard in the much smaller RE markets of rural towns.
Am I putting the cart before the horse to try putting the offer on the table first to gauge interest?
Also, You said the figures "stack up nicely" – can i take this to mean I'm not offering too much ( selling my profits to the Vendor) but also not offering too little (thereby failing to trigger his profit buttons)
I was worried the $25K vendor equity at the end of the deal may be too small, or the interest rate too low. (and I would have had to use Jedi mind tricks on 'em)
Thanks for your input in this.
regards
Andy
