Forum Replies Created
Hey Chief,
Long time, no hear! Glad to see you are still patrolling here to keep things safe.
Some thoughts about each option:
1/ I don’t see this working for residential where gross yields are 3% and lower. For commercial it might work, but the cap rate would have to be higher than the interest rate, and then how would you repay the principal. And look out if the property ever went dark (lost the tenant and another couldn’t be found). This is high risk.
2/ Yes, possible with a multi-trust structure, but the property would have to be positive cashflow. Reach out to Chris Berry at http://www.PropertyInvestingFinance.com
3/ A business can be as simple as setting up a structure with an ABN. I don’t think you need a trading business, do you? Again though, borrowing 100% brings us back to #1.
Unfortunately, the old way is still the best way…
Make more (money) – by swapping time and/or ideas for money;
Manage (money) better – through careful control of expenditure;
Multiply (money) faster – through strategic investing that considers risk-to-return (most money, quickest time, least risk, lowest aggravation);
Add meaning – give your money a purpose by adding a non-financial dynamic for why you want to make, manage and multiply that creates a compelling need that will help overcome the temptation of living the high-consumerism lifestyle promoted by marketeers who profit from your spending.
Take care,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thank you for your post.
The question here is does the shoe shape the foot, or does the foot shape the shoe?
I prefer the latter, so I would make a list of what operational requirements are needed, and then set a budget to see what you can source.
ChatGPT might be able to provide some guidance for a checklist. Here’s what my prompt returned:
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Choosing the right warehouse for your storage and distribution business is crucial for optimizing logistics, reducing costs, and improving service levels. Here’s a detailed checklist to guide your decision-making process:
1. Location
Accessibility: Check proximity to major highways, ports, and rail lines.
Market Reach: Consider how well the location serves your target markets.
Labor Market: Ensure there is a suitable workforce available nearby.
Safety and Security: Evaluate the safety of the area, including crime rates.
2. Size and Space Requirements
Storage Needs: Assess the square footage needed based on inventory levels and SKU counts.
Scalability: Consider whether the space can accommodate future growth.
Layout Efficiency: Ensure the layout supports efficient inventory flow from receiving to shipping.
3. Infrastructure
Loading Docks: Ensure there are enough docks and that they are compatible with your vehicles.
Ceiling Height: Higher ceilings can accommodate more vertical storage.
Floor Capacity: Check if the floor can support heavy goods and equipment.
Utility Services: Assess the availability and capacity of electrical, water, and telecommunications services.
4. Technology Integration
Warehouse Management Systems (WMS): Determine if the warehouse can support advanced WMS or other inventory tracking systems.
Automation: Consider the potential for integrating automation and robotics.
Security Systems: Look for modern security features including cameras, alarms, and access controls.
5. Cost Considerations
Lease Terms: Understand the lease duration, costs, and any included amenities or services.
Operational Costs: Consider utility costs, maintenance expenses, and property taxes.
Insurance: Check what insurance is required and what it covers.
6. Legal and Compliance
Zoning Regulations: Ensure the warehouse is zoned for your intended use.
Building Codes and Compliance: Verify that the warehouse meets local building codes and safety standards.
Environmental Assessments: Consider any necessary environmental inspections or risk assessments.
7. Additional Features
Climate Control: Needed if you store perishable or sensitive goods.
Waste Management: Check the facilities for waste disposal and recycling.
Expansion Options: Look for options within the facility to expand or modify spaces.
8. Logistics Services
Third-Party Logistics (3PL) Providers: Evaluate the availability and cost of outsourcing logistics services.
Transportation Links: Check the availability of local transportation services for distribution.
9. Visit and Inspect
Site Visits: Always visit the site multiple times at different times of the day.
Consult Experts: Consider hiring a logistics consultant or a supply chain expert to evaluate potential sites.
10. Negotiation and Final Decision
Negotiate Terms: Work with a real estate expert to negotiate lease terms.
Decision Metrics: Create a scoring system based on your priorities to help make the final decision.
By following this checklist, you can systematically assess each potential warehouse and ensure that the selected site aligns with your business requirements and growth strategies.Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Ah Dear Danger Mouse,
I see the trap hasn’t caught you yet! Long may that be the case!
Some thoughts for you:
Buyer Advocates
Go in with your eyes open. The usual ways BAs role is that they lock up the deal, then try to shop it around. I would want to know if they have an immediate buyer. Beware the re-trade too at the end of DD (where they significantly drop their offer after eating up the DD time). Six months is a long time mate.
Subdivision
I’m inclined to explore this option with a town planner by setting aside a limited amount as a feasibility budget. That will also shed more light on whether the BA route is likely or not. You’re playing with profit here, so the more you know, the better informed you’ll be.
Building
Unless you are an experienced developer / builder, the $300k profit is not worth the extra risk, and aggravation, in my opinion. That said, I think the SW Brissie optics are strong until the Olympics.
Long live the mouse!
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This reply was modified 4 months, 2 weeks ago by
Steve McKnight.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Some general observations:
1/ Sometimes council officers talk about what they’d like, which is different to what the regulations specifically require;
2/ A chat with an independent town planner about issues, and how to overcome them, is usually money well spent on deals worthy of closer due diligence;
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Is it physically possible? It sounds so!
Is it legal? That will depend on compliance with planning and building permitting.
Is it financial? That will depend on the cost vs. return.
Is it smart? That’s your call as beauty is in the eye of the beholder. It sounds like a hard way to make money to me re: a lot of aggravation. Also, it sounds like an active asset which isn’t normally something suitable for SMSFs (i.e. SMSFs are not allowed to run businesses).
All the best,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hello Aaron,
I don’t see why not, provided it is on an arm’s length basis.
For instance, Z Company P/L can rent from X Unit Trust, notwithstanding they are separate but related entities.
That said, it would be wise for you to speak to your accountant / lawyer about this to ensure the terms are appropriate.
Good luck!
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
First, I would disconnect the cameras so your privacy is not at risk.
Next, was the camera includes in the sale contract as a fixture? If so, I would go back to the lawyer / firm who did the conveyancing and seek their assistance. If not then I’m not sure where you stand.
All the best,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
In the circumstance you describe the benefit of the tax shield from depreciation does seem marginal, especially if the extra income could justify higher borrowings.
Not everyone has a tax-free beneficiary to distribute to, and hence the depreciation tax shield is more beneficial.
Some time ago I wrote an article on the deception of depreciation. Have a read of it here:
https://www.propertyinvesting.com/depreciation/
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Any vendor finance sale will need legal advice and careful structuring to consider stamp duty (will vary by state) and income tax implications.
I haven’t seen a loan in Aus that is assumable, but they may be out there. Typically larger commercial property deals are financed by commercial paper (such as rolling commercial bills), rather than a loan like a home loan. These are unlikely to be assumable.
Buying the company will still likely trigger income tax and stamp duty implications, but again, legal advice is warranted.
If you don’t proceed, you are welcome to flick the details of the deals to me to see if it is of interest in the new fund I have established.
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hello George7,
You have identified an issue in your due diligence, and you are right to want to try to manage and mitigate it.
However, it appears you cannot do as the vendor will not wait.
If it were me, I would go under contract with a general 45 or 60 day due diligence clause and seek to do my own investigations. Perhaps you want to point to some other need for the clause though, perhaps to get your finance sorted? Once under contract I would approach a town planner for assistance.
Assuming you cannot cover the risk, you have to assess your risk appetite to proceed (or not) with the known risk. Does the upside outweigh the downside by enough of a margin for the risk. You also want to be paid extra for the risk.
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Howdy Stargazer. Member since 2002 eh? Thanks for sticking with me :-)
The problem here is that you are letting the asset lead the outcome. That is, you don’t know what to do because you don’t seem to have a clear picture in your head about what you want your assets to achieve.
Here’s what I wrote in prep for a Money Magnet podcast yesterday:
- If you don’t have a then, you won’t have a why
- If you don’t have a why, when becomes based on urgency and you become reactive rather than proactive.
- Without a why and when, what or how is unclear, and so you will gravitate back to your parental and societal programming
- When it comes to investing, that is likely to be good assets, in good locations, in the hope of a good profit.
- Set a ‘Then’
- Identify ‘Why’
- Clarify ‘When’
- Let the Then, When and Why determine the What and How
In summary, the right thing for you to do depends on what you want to achieve.
Final comment – make sure you come to my upcoming 1-day seminar. I will explain more about this at the event in the context of ‘making your money count’.
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
This is an interesting question and I would have thought something would be legally possible, I just don’t know how. As it is a legal matter, it is best to seek legal advice. You may also like to look into reverse mortgages (do your due diligence) as a way of unlocking equity.
I imagine there will be taxation consequences of co-owning, and stamp duty issues. Again, best to talk with a lawyer.
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for the post.
I’m sad to learn your professional network is telling you something can’t be done when mine time and time again says it can be (and I continue to use and apply it).
I’m not sure how you reconcile that, and I’m over repeating myself over and over and over again on this issue.
If you can’t, you can’t. If you can, you can. Find a way or make a way.
Bye,
Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Charlie,
That’s interesting as I am in the final stages of winding up my USA affairs after investing there since 2009.
The best tip I can give you is to remember that money follows management. Deals might stack up on paper, but unless you have strong, reliable and trustworthy management, you will struggle to put bucks in the bank.
The taxation consequences are complex and expensive, and insurance is getting very expensive and difficult to source in some areas (like wind in Florida).
Think about what you are hoping to achieve, and then consider whether the opportunities closer to home might be less risk and aggravation.
Bye,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
G’day there. This is a question of whether the improved value exceeds the cost of acquisiton and improvement (rezoning) by enough of a margin to justify the risk and aggravation. You’ll need to do your numbers to find out.
One thing I would be trying to figure out is whether there is demand for such land, and if so, at what price. Pre-sales would be important to de-risk the deal, so chatting to an agent would help. Start with end sale proceeds, deduct costs, and see how much profit is left over.
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hello Charlie,
This has not been my experience, nor the experience of all other’s I know.
I will do an update on the matter via a webinar soon.
Remember that the structure only works for +ve cashflow property and you will need to use business bankers. Contact Chris Berry from http://www.PropertyInvestingFinance.com for more assistance.
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hello Jon.
Thanks for your post and sorry to read about your situation.
I am confused about the insurance policy. Whose name is it in – yours or the bordy corporate (BC)?
I would expect the BC would ensure for public liability and for structural matters for common areas, but that each owner is responsible for their portion of the building (strata title), and public liability of the same.
As for what is and isn’t covered, you should read the relevant policy carefully and even seek legal advice in order to get an expert opinion. Given the dollars involved, (up to) a few thousand in legals seems to be well worth it.
Sometimes insurers will disclaim out of the gate and need some further ‘encouragement’ to reassess and pay out. Hence a good lawyer is where I would turn to for help.
Sincerely,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
It can be hard to get loans based on business income Charlie. Let me explain…
First of all, the business is its own entity, and if it already has debt then that will count against further borrowings. The business will likely need several years of financial statements and tax returns to support profitable operations, or else will require a director’s guarantee to support the debt. Furthermore, most borrowers will only take a portion of the net income, and possibly a conservative portion!
What happens in practice is that business profits usually flow through to the owner, who then has that profit reflected on their income tax return, and who will then use that income as evidence to support borrowing capacity – either in their own name, or as a guarantor. Again, a lender may discount this income to some (or all) extent depending on their assessment of its reliability.
Re: the specifics… get in touch with Chris Berry and ask for his assessment. He can be contacted at http://www.PropertyInvestingFinance.com
Bye,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Charlie,
Perhaps your lawyer has a view I haven’t heard before, but my understanding of trusts, companies and corporate law is that trusts separate ownership and control. Can your accountant contact your lawyer to confirm their opinion and perhaps provide you with a summary?
All the best,
– Steve
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This reply was modified 2 years, 4 months ago by Steve McKnight.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hello there.
What’s the address please? Let me do a little bit of searching.
Do you have any marketing from when you purchased that says the larger land size? Can you demonstrate that you relied on the real estate agent’s representations(perhaps by communication pointing to discussion about land size?)
Most advertising material does come with a disclaimer on it saying, essentially, all care and no responsibility. Indeed, checking land size ought to have been done during your due diligence. Sadly though, that’s now a bit like saying don’t eat that 10th course at the Chinese buffet.
That said, you may have something to discuss with a lawyer if you feel the agent engaged in false and misleading advertising, or if the Vendor falsified their Section 32.
Note – this is NOT legal advice as I am not a lawyer. Just thoughts on what I would do if I were in your shoes.
Bye,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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This reply was modified 4 months, 2 weeks ago by
