Hi Guys
My brother and I are starting a new business in the south eastern suburbs of Melbourne following Cherie Barbers system where we plan to buy/reno/sub-divide/develop as many others on here are doing and are looking for advice from anyone who feels suitably qualified and generous enough to give it.
Our situation is complicated and I will try to describe it as best as I can.
I started a business in the construction industry which specialised in caulking and just as I got it up and running and profitable I became chronically ill and have not made a substantial income for the last 2 years and am basically where I started 5 years ago but am ready to get back into things and start making some money to plan a decent retirement.
My brother runs a plumbing business and when I became ill incorporated the caulking business into it and now mainly does the caulking side of things as that business is in high demand and has an excellent turnover with all relevant profits and loss statements and tax returns to prove it.
We have access to approx 80k in startup capital and my brother is just about to sit for his builders license which should be accepted and can do a lot of the work ourselves and have good tradies who will do things for us at a good rate.
We will both be paid 50k per year for the first year and 60k for the second and maintain positive cashflow provided we can attain finance for the purchase and renovation at this point we would only be doing cosmetic renovations as we are starting with very little in the bank.
We have tried to employ the services of a local Accounting and financial planning service who specialise in these kind of things but so far have been unimpressed with their service we contracted them to draw up business plans, cashflow forecast and balance sheets which took them 4 weeks after numerous unreturned phone calls and impromptu drop ins to their office to get a draft to us which was mostly what we supplied them in our quickly drawn up templates (there bill came after 2 weeks so at least their billing department is proactive)
The questions we have are as follows:
1: What is the best structure as we plan to do 3 projects in the first year and then minimum of 4 every year and slowly move target suburbs to more affluent areas to increase the profit margin?
2: Can we get finance for the properties and the renovation costs if so what would be the maximum amount we could borrow?
3: Any suggestions for professionals in the area that specialise in these sort of businesses that we could engage to give us advice and help us achieve our goals.
Thanks to those that read this and thanks to any who reply.
1. Define 'best'!
This will depend on your situation, the family situation, the existing business set up, land tax, stamp duty, long term intentions and asset protection requirements. And day of the week.
2. Yes. you could borrow 105% or more for each deal. But htis will depend on existing properties. Generally you can borrow up to 90 to 95% of the value of the property.
3. I could possibly assist depending on a few things….
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
Hi Terry
The current business is a Pty Ltd company.
My brother is single and I am living with girlfriend of almost 7 years.
Long term we hope to either stop existing business or hire someone to work it and focus on property development.
We don't own any property at this time but hope to own our own homes and build up a portfolio for retirement.
We are relative newbs in investing we have been interested for a long time but are really starting to research everything now so I am not sure about taxes and asset protection requirements yet we plan to buy reno and sell within 4 months.
Hi togs
Firstly hopefully you are feeling better? Health is a very important aspect of life so make sure your stress levels are under controll
i can vouch for terry he is a experienced member within this forum but he is also good at what he does
I have a few questions though:
1) Since this is your first project are you better off doing this in your own names? For tax reasons etc
2) The melbourbe market is flat and renovation game is very competitive, sso if you can't sell the property how will this effect you?
3) what is your target market and who are you competing against
4) I say start small learn the rropes and build up from their
If you need a accountant I can recommend some one who Specilises im this feils
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
Hi Johann
1:We thought about doing the first one under my brothers name to avoid CGT but we don't want to wait 12 months to sell.
2:We have been researching property in our target area and auction clearance rates for renovated properties are good, good buys are harder to come by as there are a lot of large blocks in the area for developers if we don't sell the first two we can always buy them personally and live in them or rent them out we will both have enough to make up any shortfall with our existing business income and stop the reno business.
3: Our target market will cover the mid range buyers not top end until we have funds to do structural renos.
4: We intend to start small as thats what we can afford we have had a lot of experience working for builders and home owners and always pick their brains to gain knowledge from their mistakes.
We are happy to take onboard any suggestions and recommendations.
Thanks
Hi Togs,
By all means speak to an accountant and/or lawyer about business structure and Terry would be a good phone call to make. At the same time it would be advisable to have a comprehensive discussion about your borrowing capacity to see if your plans will work. Terry would also be able to assist with this side of your plans too.
For now you need to get started – our business coach used to hammer us until we made and appreciated the benefit of 90 day plans. Having an outline and timeline meant we had to stick to time and this was invaluable to us as we started out in a new business two years ago. We actually started planning about 2.5 years ago.
Once you have a project out of the way you will then be in a position to make more accurate plans. You will also start to understand what your profits and costs will start to look like.
I wouldn't be overly worried about getting business planning advice from a financial or business planner yet. That can come when you have some runs on the board.
A key ingredient to success is keeping your costs under control. You probably don't need fancy whiz bangs yet.
Hi Derek
Thanks for the reply.
We are trying to establish our borrowing power but so far everyone seems to either give us different advice or no advice, it is so frustrating.
We used a business coach a couple of years ago and it really helped to understand the structures and planning that goes into a successful business and we are running a really solid trade business for our own personal income but we do not wish to grow this business as good staff are hard to find and even harder to hold on to.
The business planning stuff we had to do in order for my brother to pass his Cert 4 in building and will need it to gain his builders license so we want to spend the time and money now to get a comprehensive plan that we can use to obtain finance.
We are in the fortunate position of being involved in the construction business and have access to good trades in our friends and can keep costs down through trade suppliers and doing a lot of the work ourselves, our early projects will be of lower resale so we will avoid any over the top "luxury" items that are not necessary for the project.
We are 33 and 30 yrs old and have always worked hard to achieve what we have and are ready to give this a good go, we both enjoy working in building and are keen to get started that is why I am seeking a good team of professionals to help us in the areas where we have little to no knowledge.
Our budget at this stage is not huge so we will have to be careful with money but we are happy to pay a fair price for good help, we don't expect to pay less than anything is worth but we cannot afford to pay for the top shelf professionals either.
Thanks
Togs wrote:We are trying to establish our borrowing power but so far everyone seems to either give us different advice or no advice, it is so frustrating.This is the critical aspect of your operations – certainly until you get the ball rolling.
If it is any assistance I would grab yourself a decent broker and try and nail your borrowing capacity down a little.
Once you have a figure to worth within you'll be able to set up some sort of plan that suits your timeframe, skill set and budget.
Togs wrote:We used a business coach a couple of years ago and it really helped to understand the structures and planning that goes into a successful business and we are running a really solid trade business for our own personal income but we do not wish to grow this business as good staff are hard to find and even harder to hold on to.This knowledge is all transferrable so your previous knowledge, skills and attitudes will provide you with a good base from which to launch.
Togs wrote:Our budget at this stage is not huge so we will have to be careful with money but we are happy to pay a fair price for good help, we don't expect to pay less than anything is worth but we cannot afford to pay for the top shelf professionals either.Yup, keeping costs under control is absolutely critical.
Hope it all works out for you both.
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