Hi all,
My husband and I are in the process of looking at doing our first development. I am in Steve's 250K club and have therefore read his latest book and gone through the seminar that was part of the software package. We are confused about Steve's examples using CoCR though. On the particular deal where he uses his 3 x 1bdrm unit block he puts in cash of approx. $86000 in cash for deposit and closing costs. His end profit is expected to be $40,000, a CoCR of 40-odd%. This is apparantly a good starter deal for beginning investors according to Steve. This is where we are confused and would love some assistance please…….We will have about $110000 profit from the sale of an investment property and will need to put about $75,000 cash into this development. HOWEVER, if I were to put in this amount of cash I would be disappointed if I only made $30,000 in profit in the end becasue I started with more cash to begin with than when I finished. I hope this makes sense but basically we think that if you start with a great wod of cash shouldn't you accept nothing less than making that cash back plus some??????
Can anyone please explain what we are missing here because I don't see financial freedom coming my way by continually putting in more cash than what I get out??? Doesn't the CoCR need to be atleast 110% so you're getting, at the very least, your money back plus an additional 10%?Thanks for your time and any other 250Kers out there looking at beginning their investment journey I'd love to hear your stories. I thought Steve and Co were going to create a particular site where we could collaborate and share but maybe this forum is what they were talking about.
Happy investing to all,
SharonHi Sharon
Would you provide some figures?
you can't be getting out less than you put in otherwise you are losing money! So you must have it wrong.
bear in mind COCR is only one measurement and doesn't necessrily mean a deal is bad.
eg $100,000 in a development of $1,000,000 and you sell for $1,500,000
or $1,000,000 into a development of $1,000,000 and sell for $1,500,000.You still make the same profit, just the COCR is different because of less money used.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Sharon
Do you have a current home and mortgage against it.
Structured planning your finances before you rush in and pay down cash for a deposit could be time well spent.
Richard Taylor | Australia's leading private lender
Hi all,
This may be a silly question but what does COCR stand for? remembering im new to this.Cash on cash return. If you put COCR in the search box in the top right corner, some other posts come up explaining it.
Hi again,
Thanks for the feedback. I have used the ROI and CoCR methods of doing our numbers for this deal as outlined by Steve. The figures seem to stack up for us and could prove to be a good first time development opportunity. Our CoCR stands at about 174.9% with an ROI of 18.4%. We are taking Steve's advice in terms of aiming for developments that will generate about 20% becasue of being novices. We also plan to set up a trust to purchase this investment as we are one of the many whose finance structure is all wrong, so we are selling up our errors and starting afresh. Nerve wracking but very exciting! After speaking with the town planner, a local surveyor and several builders, we have budgeted for subdivision costs of $30,000 and build costs of $1400 per square metre (obviously among the many other costs involved).
The thing that we remain confused about is Steve's example in his Master Class Starter pack that I purchased at his recent book launch. It stands as follows:
Pages 55-56 of Masterclass Starter Workbook – Steve needs $66,000 cash to put down for deposit and closing costs on block of units & borrows the remaining $200,000. He then needs to pay cash for holding costs of $22,500 & borrows $70,000 for renovation costs. After selling all three units he expects to make a profit of $40,000. His cash back is $40,000 and his cash down is $88,500 making this a projected CoCR of 45.2%. All of these figures come from the workbook. Maybe for developments it is best to consider the ROI???. I understand CoCR is only one measurement but if it's a measurement of your cashflow isn't it one you want to consider fairly seriously?I know I must be missing something here. If anyone can shed specific light on this example – especially if you have been using the workbook and Masterclass Starter Class to learn about this stuff, it would be greatly appreciated.
Many thanks,
SharonHi Sharon
Could it be that the $40,000 profit Steve is talking about is over and above the $86,000 cash invested. A profit in my mind would be the surplus cash, after having taken out initial costs such as the $86,000 put in.
Regards,
AndreThanks for your assistance guys. I looked at the link rastogia and that gave me a little more information. The language of accounting and investing (the numbers) will take a little more reading for understanding however I'm getting there. Cheers,
Sharon.Property Investment Cash Flow Analysis Software for free can be found at http://www.ipropertyco.com
I just went to the iproperty web site and tried to register but said my phone no. was invalid. I know my own number, did anyone else have a problem seting up a user account
Why put your own phone number on a website? just make it up and save yourself and your private information from being exposed.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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