Hi willister,

I'm not sure if you have found a tenant but have you ever thought of giving a rent free period to help the business operator a leg up?

If you could find a tenant, get them to pay all out-goings, so at least you don't have to pay the rates, etc.

I have never owned a commercial property so I really wouldn't know if this is do-able.

Just an idea.

Angel

Hi Larry,

I agree with Richard and Anthony.  I self-managed all IPs, including those inter-state.  Sorry, that's a lie, except for the duplex in Millicent.

Angel

Hi all,

It is cheaper to buy properties there now that the Australian dollar is so strong.  But the declining US$ also means that the NET rental return is also shrinking. Time will come when what you expect to be AU$700 in the bank, would be AU$600 instead.  An exaggeration but you know what I mean.  So as I can see, there are two risks involved here: a shrinking passive return and an underlying asset that may take years to grow in value. (Although I do know that capital gains really depends on what you buy and where.)

Then, I assume that there is forex charges to be considered — when income is banked in your US$ account, and you need to withdraw the money from Oz.   All these little charges impacts on net return.

Secondly, about printing money, the US is not the only one doing this.  North Korea is printing the green buck by the millions.  Not to mention Columbia and Mexico and Iraq and Afghanistan and on and on it goes.  There are lots of fake currencies floating around, which I'm pretty sure impacts on the state of the economy.

All investment vehicles carry risks – even cash (just think of the thousands of people who lost their cash when banks collapse or when you're just plain robbed).  At the moment, it's still a pass for me.

I believe the returns that are bandied about re US return can be achieved in Australia.  It's a matter of creative thinking.

Thanks guys.

Angel

At any any rate, you looked 16.

Guys,

This gorgeous girl is only 21, she's been working part-time and saved this money over two years.  It makes me very determined to stand guard over youngies… when I can. 

Angel

Hi all,

I've just met her in person and found out that the original post is far from the actual feasibility study.  Not even close.

Firstly, the feasibility study was part of a "homework" from a seminar giver.  Second, the premise of the exercise was that "she does not the money" so she zeroed in on this one and assumed nothing will come out of her pocket at all.

The exercise actually said, the property was valued at $980K.  The owner wants $480K now, so she actually needs to borrow the money from the bank.  And then the vendor will vendor finance the remaining $500K at a 2% establishment fee plus 11% interest.  It was not clear whether the 11% interest was payable on arrears or on-going.  My personal take on this is it had to be monthly interest as the vendor has now lost his home and has had to rent.  No one in their right mind will pay rent out of their pocket.

What she also didn't understand was how much she actually must borrow from the bank.  It was not $480K but closer to $700K to pay for the following:  according to the exercise book:  stamp duty ($40,400), architect fee ($18K), consultant's fee ($25K), capitalised interest in advance on $700K (depending on interest rate), marketing materials to pre-sale the three townhouses ($5,500), and various other fees.

So I asked her, where will you find the money to pay the bank loan of $700K and the vendor finance amount of $500K (mind you, 11%)?  She said she didn't realised that she must have servicing capability to pay on-going interest.  I supposed she can minimise on-going costs if she capitalises the 11% interest on the 2nd mortgage and paid this as a lump-sum.  But then the bank loan will also balloon.

Richard, I can imagine you scratching your head.

When I went through the other aspects of the process with her, eventually she realised it really doesn't hold water.

The end product was supposed to be 6 townhouses.  Of which, the original vendor wants one for him and the original loan of $500K; the builder 2 plus $240K.  For the purpose of the exercise, she will sell two and she has to pay 2.2% agent's fee.

Not only that but how to find this fictitious vendor.  For this scenario to even materialise, she has to hit the jackpot on the following:

1.  She needs to find a vendor with an unencumbered who is willing to do this deal (not bad).
2.  The land has to be with the right zoning and size to allow 6 townhouses.

In other words, she could be waiting forever as supply of land with the right zoning comes in few and far between and anyone willing to do this deal will likely do it with a developer who has track record.

She is a lovely girl, full of life and ambition and I have no doubt that she will go far with the right advice.

I hope it now makes sense.

Angelina

Amen to that Scott.

Something doesn't add up… seemingly.  The premise appears too good to be true.  However, I don't discount the fact that some people do get lucky.  At my age, I do believe in luck (with hard work, of course).

Angel

Hi Michael,

Thank you for being honest and up-front.  You ARE good at reading people, I am, truly,  not into land banking.  Only going for positively geared properties now. 

Good luck and I hope you find the right buyer.

Angel