Hi,

Great pick up!

The whole issue of taking a risk is very underdone in many discussions.

Finding the resolve to beat the comfort zone can be difficult, but I’m yet to meet a success in any field that did not have to risk something to achieve a better outcome.

Thanks again for the contribution.

Cheers,

Steve McKnight

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Hi,

Shortly we will be releasing ‘Investment Detective’ which is software designed to help you crunch the numbers and keep track of your property profits.

It is designed to work alongside a MYOB or quickbooks so that you enter in the day to day information in those programs and then input the totals (for the relevant items) into Investment Detective for returns to be calculated. The special introl price will be around $70 (give or take). Stay tuned for more info.

Other than that, I know that Somersoft have something called ‘PIA’ which I assume will be relevant for your purposes. The product blurb can be found here. It is priced at $245 though.

Cheers,

Steve McKnight

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Hi Michelle,

Hmmm…

Well, to add to the discussion, the first question you need to ask is “what outcome do you primarily want from investment?”

The two options, at this stage, are either positive cashflow (this is, income) or capital gains (that is, growth).

Inner City Apartments whould normally fit into the growth model given most are negative cashflow. Therefore, the name of the startegy is to get more cap gains than any income loss.

That said then, let’s quickly crunch the numbers:

Rent: $26,000 (fully rented)

Loan payment: $12,250 ($175k @ 7% I/O)
Management: $1,820 (7%)
Body Corporate: $2,500 (say)
Repairs: $500 (say)
Other: $500 (say)

Net Cashflow: $8,430

Cash In:

Deposit: $175,000
Clsoing costs: $18,750 (5% of PP)
Total: $193,750

Cash on cash return (CoCR): 4.3%

Capital gains: ???

The reason this is +ve cashflow is because you have contributed so much cash. On the flip side, doing this kills your CoCR.

You can get 4.3% at the bank no-risk, so it is not enough to go into the investment considering the extra risk. As such, it will be the expected capital gains that makes the deal sweet.

Having said that, I’m not too sure if Inner City Apartments are well placed to earn cap. gains… but you need to make up your own mind.

I hope this has helped.

Cheers,

Steve McKnight

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Hi John and Paula,

Thanks for your post and welcome to the forums.

I’m not sure who told you not to use loans as leverage is important to access ‘professional’ returns.

Having said that, borrowing money has risks involved which need to be mitigated and managed rather than avoided.

As for a downturn… my own opinion is that it is likely, however, in the same token, not all properties will be affected.

Personally, on the face of it, a 72% CoCR deal sounds pretty good to me! Furthermore, if you focus on the income does it matter too much if your property loses some capital gains in the short-term?

Just avoid being placed in a situation where you may be forced to sell and bank your income in the meantime as the momentum to carry you through the flat periods.

If you feel comfortable, can you flesh out the nature of the deal in more detail? It would make for a good discussion.

Bye,

Steve McKnight

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Hi Simon,

From the research I have done they offer +ve cashflow deals based on some rather large assumptions.

Also, the deals I’ve seen are not +ve cashflow in their own right… they are net of tax deductions.

Just go in with your eyes open. In particular, be mindful of the fees, the budgeted vacancy, the attainable rent, and the annual expenses.

One final thing… ask yourself, if this is such a great deal, how many of them would I need to own to achieve my investing objective.

Hope this helps.

Bye,

Steve McKnight

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Hi labinnsw,

Welcome to the forum!

A good idea would be to list out all the assumptions behind the deal and then seek information about whether or not they are valid.

On a broad level, assumptions relate to:

A. The quality and security of the income stream (quality of tenant, vacancy, realistic rent etc.)

B. The quality and security of the property (budgeted costs <rates, repairs, insurance etc.> structural issues, illegal works, zoning etc.)

C. The quality and security of your finance (can you get finance, and if yes on what terms)

I note that you have ordered BuyerBeware… be sure then to use the Financial Analysis template to crunch the numbers.

How about…

“I’d like to submit an offer on this property please. I offer $XXX,XXXX with a $YY,YYY deposit and the balance in XX days. Also, my offer is subject to the following conditions: <insert conditions>.”

Some agents will want the offer in writing or maybe even will give you a contact to sign. Just make sure that you leave yourself an out clause should you change your mind. If you are new to this then you can make a clause “subject to the my solicitor’s approval of the contract”

Again, use the info in BuyerBeware to craft an offer that is a win for all involved.

Well, I’d imagine that you’d need two things:

A. A deal which you can onsell; and
B. A list of investors who would like to buy the deal from you.

If you can match up these requirements then you should be able to write some business.

Good question. As far as I know such a resource does not yet exist. Perhaps look abroad to the US as their bird-dog market is more developed.

Nope – not from me. Just be careful with this line of thought as advertising is not permitted on the forum body, just in the signature at the bottom of posts.

Cheers,

Steve McKnight

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Hi,

In our office we use WAMM from the guys at http://www.darlop.com

Regards,

Steve McKnight

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Hi,

When Dave and I went over for the first time we stayed just under a week.

We hired a car and drove a long, long way. Just on that, travel times in NZ are a lot longer than in Aus for two reasons:

1. Generally, the roads are not as good or well maintained; and

2. There are far more hills and corners which cuts down your top speed.

Really though, your length of time on the ground will depend on what you want to achieve. I would definitely have a plan (however sketchy) and try to do some research on the Internet about various towns and areas before going over.

Remember that regional NZ is not as populated as here, and that there are many smaller communities (7,000 to 13,000) with further satellite and feeder towns.

Cheers,

Steve McKnight

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Hi,

It is not illegal, but from discussions I have had with NZ solicitors it is viewed very dispassionately, even more so than in Australia.

It sounds like there have been all sorts of unusual terms included in contracts that limit a purchaser’s equity and waters down their rights to next to nothing.

Despite what the scaremongers might have you believe, vendor finance in Australia is well regulated within the confines of the UCCC and stated based Fair Trading Laws (as well as State based property law too).

I’m not sure the same level of protection is available across the Tasman.

Cheers,

Steve McKnight

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Hi,

In terms of legitimate charities, a good friend of mine works in the aid industry and made me aware of the following link:

http://www.acfid.asn.au/campaigns/asiaearthquake.htm#appeals

Regards,

Steve McKnight

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