Forum Replies Created
I'd have to disagree there Charles. Three units is not overly large for a first time development, probably too small if anything. It is generally pretty hard to get decent margins on smaller projects, although there nare always exceptions. Finance is pretty simple for projects where the loan required is within $1 mill and $3 mil, depending on the geographic location, as there is no need to rely solely on banks as potential financiers.
Hi Tania,
If you are doing this remotely i suggest you employ a good project manager, they can also give you most of the advice you are after. In terms of finance most banks will fund the lower of 80% of costs and 65% of end value for a commercial construction loan. If you are willing to pay more you can often get more money from a specialise development lender. The easiest structure to finance is a new trust with nothing else in it and a non trading corporate trustee. If you want to ask any more specific questions i'd be happy to expand on this.
Regards
AlistairHi Ben,
Different lender pay different amounts and have different structures for their payments also eg Westpac pay 0.5% upfront and 0.15% Trail, CBA pay a higher upfront and trail, but no trail the first year, Homeside base the trail % on the number of years the client has been with them. With commercial loans the broker generally has a greater say in their commission levels, but different lenders have different profitability models for broker introduced loans and its pretty important that you clients are getting something at least as good as what they would get through a branch and its a good idea if they get better.
Aggregators generally take 20% of your commissions as their payment, plus they charge monthly fees, but some charge a fee per payment and others a set monthly fee. High volume brokers get a better deal always. Each Aggregator has a different model in terms of how much assistance they give you and this is reflected in the fees they charge. Most don't charge anything upfront, so for $20K you'd want pretty good service.
REgards
AlistairHi Ben,
Knowledge of Super is more around setting up structures for people who are able, or soon will be able to access super. This changes the way their money should flow, so it is an important aspect of loan structuring. It's not difficult to learn, and you need to know about it to offer a good service to such people. This group also tends to have a greater amount of money, so from a selfish point of view you want to be able to service them well. This knowledge gives you a great competitive advantage over your average broker or loan officer amongst high net wealth clients.
In terms of starting off, I had the great advantage of having a father with a very successful town planning consultancy and a long list of property developer clients who hated their banks. This is what prompted us to set up the finance business. I made more than $150K in my first year trading, in fact I pulled over $30K commission from the first loan i wrote, which was for a $10 mill development.
To hit $150k in upfronts commissions you need to write about $30 mill of loans, this is far from a huge amount. Its gets easier as you go along and your trail book builds. As an example if you wrote $30 mill, the next year your trail book would be worth about $45K, so you would only have to write $20 mill to maintain your income at that level.
Most brokers never get anywhere near this sort of income, but there are a lot that write massive amounts more. It all comes down to your ability to market yourself to new customers and provide a good service so you get referals.
Regards
AlistairHi Ben,
Having no banking background is not an issue, the areas of expertise that give you an advantage as a broker, in terms of the service you provide, are knowledge of accounting, taxation and superannuation. You don't ned to be expert in any of these, but you do need a solid basic knowledge.
Financial success comes down to your ability to attract clients directly and/or through referal sources. If you consider a franchise then the franchisor should be making this part of the operation more simple. Personally I see aggregators as a necessary evil and wish to pay as little as possible to them, in return i expect nothing but access to the lenders that will not deal directly. If you want a lot of support then probably you should be prepared to pay. Smartline has a good reputation and has a lot of high volume brokers, so they must be OK.
$150K per annum is pretty low, you would want to be aiming to earn more than that.
I hope this helps.
Regards
AlistairI have 2 resi and a commercial property in Karratha and a large development block in Derby in WA. I have done well out of all these properties, but prices have been extremely volatile, it hasn't been unusual for prices to move 20% one way or the other inside a couple of months eg at the heigfht of the financial crisis prices tanked severely, but they recovered in about 3 months there has been extreme volatility ever since. I like the major mining areas as theire success is pegged to the mining boom, which i think will last for a long time, but they are not for the faint hearted.
IMC Newbury wrote:RickH wrote:Spuking is self promotion to drum up business. To be honest there are alot of you doing it. anyone putting the company name and email address with the types of comments like" if you want to invest in this area ….call me " that is self promotion. These forums are for people or investors personel experiences. If you wish to detail your personel investing experienes (not business promotion) feel free. I know there are people posting who work in real estate in the USA who do not end every post with the business web site and personel email address . This form is more and more being used as free advertising ….not the intended purpose. Oh and check out my new website http://www.donthaveone.com or email me : [email protected] : I dont charge any feesYou got to be kidding… this whole tread is about self promotion and <moderator: edit> posting undercover…
Hi RickH,
I would suggest its not all that smart to try and exclude people who are ofering services from posts. What would the finance forum look like without all the brokers there? If professionals are adding good information to the forum then they are doing everyone a favour, if they never get business from their contributions they will probably leave and everyone is the poorer. Having said this I also have issue with those who blatantly self promote without adding anything and also those who make out they are experts in ceetain topics when theyu obviously aren't (This is the biggest issue on this sub-forum I would suggest).
As a side note, if you register a signature with company details etc. in your profile it immediately appears in all posts, including those made in the past.
Selling via lease option seems a pretty good way to get rid of any potential issues with property management, make it worth the tennants while to look after the property and pay on time.
HighIncomeProperty wrote:Alistair,
I just wanted to ask (feel like I have to) did she (your buyer) just agree a deal with the seller to assume the mortgage payments, or did she actually sit down with the banks and get them to sign off on it?
Reason I am asking is there are thousands of people out there willing to let you assume their mortgages – they might owe 100K on a home that is "worth" (based on tax value, mortgage value, appraisal, whatever….) 250-300K, but the banks would never sign off on it, if they knew. This will be fine for years, except when your buyer wants to get title or anything else goes wrong.
There have been scams like this in the past, where a mortgage is assumed often by a foreign buyer and a fee of 20-30K is paid, which is usually just pocketed by the agent.
I'm not saying at all that this is what is going on, but I know Texas is a really harsh state in case of foreclosure, so most buyers would rather walk away and let someone assume the payments, wheter they do it legally or not, I can't tell you.You will have to get Nigel to give you details on this. I'm just her broker in Australia and I had her send me the details of her deal out of interest. My understanding of the process is that the property is sold into a land trust which is owned by the Australian Investor, with the Bank's consent.
USA wrote:That sounds fantastic! Alistair who did he get the finance through?It was a she, and she didn't get it through anyone. It was a pre-forclosure deal and she assumed the existing loan.
I'll give you the actual numbers on a deal a client of mine did in San Antonio with Nigel:
Property – 3/2 House
Val – $80-$90K (Property was already Presold under a lease option agreement for $82,900)
Loan – $31K (30 Year Loan at 7.10%)
Cost to Client (Net of fees & minor rehab): $20K
Rented – $825 / month
PITI Payment – $525 / Month (Includes all principle, interest, taxes & insurance)Regards
AlistairNigel from this forum operates the only service I know of that provides finance as well. They do mit by the investor assuming an existing loan on the property. The reuslt is investors can get exposure to a $100K+ property for around $20K and the loans are generally pretty decent in terms of rate etc.
I'm not personally keen on investing in the US, but i have known Nigel for a long time and have several clients who have used his service, so I've seen the deals. They seem to stack up pretty well.
Regards
AlistairI don't know anthing about Kansas, if you have done your homework and it came up as a good place to invest then great. The issue i have with most of the US services is the lack of available finance. 15% return on capital is not great compared to what you can get on a leveraged return on a +ve cashflow property in Australia, also if you aren't borring in US dollars you are far more exposed to exchange rate risk. This may end up in your favour, but it is still an extra layer of risk. I hope it goes well for you and congratulations on taking the plunge, too many people come up with great ideas then sit on their hands and do nothing, Investing in the US at the moment seems like a once in a lifetime opportunity and i'm sure some people will do very well over there.
Regards
AlistairRESULTS is a fantastic program.
Hi Lamp1111,
You have received good advice from Jamie. I suggest you contact him or one of the other great brokers on this site to help you set up your loans properly. By borrowing the deposit ijn a split facility you will be maximising the % of your overall debt that is tax deductable, doing anthing but this will cost you money for no benefit.
Regards
Alistairtechamitdev wrote:As someone above has just said that I dont think that going through broker is required if there is an easy application– You are a PAYG
– You have liquidity
– You have enough other assets to increase the loan amount.thats it!
Although I will be interested to know how brokers can give the benefit in regards to giving commiission to borrower.
Then of course borrower has nothing to loose to go through borrower. But I am sure there is something hidden words in between.
Anyone?
If all you want is a loan processor then likely thats all you'll get, there is a lot more that a good broker can give an investor. Personally, I charge a fee on top of keeping all the commission and i have a comparatively large practice with 4 brokers and an assistant. There are a lot of people, including quite a few who post on here that think my payment structure is value for money. I'm not sure if Richard charges a fee, but he could easily justify doing so also.
I strongly suggest anybody who is asking the question of whether to use a broker, have a look through the archives of this forum and you will see on display the depth of knowledge of some of the great brokers who do or have posted on here. The best way to save money is to have an optimum tax structure, interest rate and rebates pale into insignificance compared to this, to acheive this you need a good accountant, potentially a financial planner if super can be introduced into the structure (a must for anyone approachjing or over 55 years of age, or with an investment horizon that extends past this age) and a broker who knows enough to work effectively with these advisers. Most bankers, and most brokers for that mattert, don't have a clue about taxation or super.
Regards
Alistair4jojo wrote:I have actually spoken to a few mortgage brokers around Australia and I guess I just haven't found a good one. That's why I am seeking open opinions from people who have used them and people who have been able to be successful by doing it themselves.Interesting Alistar, you mentioned that you are 'biased because I am one' , glad you mentioned this. Of course you would agree with a trailing commission and not a one off payment for service.
I don't agree with a trailing commission on each an every home loan (which could obviously go on for years – that's a lot of money ).
I don't care if the bank pays it directly to the mortgage broker , the bank has to get it from somewhere and as a customer I a probably paying higher fees for this in the long run.
I would prefer if the mortgage broker shared his/her trailing commission with me – that seems like a fair deal. A win win for both.
Lots to consider…
I'd be happy to not earn trail if i could pass the savings on to the client. Financial planners can do this with trails on managed funds etc. I would just charge a fee for service and could model this in a cost effective manner for clients, as do fee for service financial planners. I make most of my money fee for service because most comes from Development finance, where trails mean next to nothing anyway so this business model would suit me fine. But the banks won't let us do this as it would mean the end of branch lending, so trail becomes part of how brokers make money. You need to consider that paying back trails is an administrative cost, one that I certainly wouldn't entertain personally, there are plenty who will but I doubt you will get the sort of service an investor should demand. Good luck with your investing.
Regards
Alistair4jojo wrote:Thanks Alistair, but I don't have an attitude towards mortgage brokers. I'm just looking for advice on which way to go.I am open to suggestions that why I posted on this site.
If people have used a mortgage broker and found them more than helpful (as you mentioned more than just a loan processor) than that's the sort of thing I interested in knowing about.
But you do, you stated "I would be happy to use a mortgage broker to do the initial work and pay he/her a fee for this service but I'm not keen on the long term fees they get paid, even if it's paid by the bank."
This scenrio is bad for you because you would have to pay a cash fee and bad for the broker because this would unlikely be as much as they would make in commission. The end result would be that you would end up with the same loan, if you were lucky, but the broker would undoubtably not waste much time on you. The only winner in this situation is the lender. My other point was that if you only treat a broker as a loan comparison service, that's likely all you will get, you should demand more, go to http://www.cannex.com.au if you want to compare loans by interest rate.
I'm sure others will give you their experiences with brokers, I'm biased because I am one so I'm not going to comment here, but you really should speak to one yourself. If you already have a few IP's there should be numerous ways to assist you.
Regards
AlistairA lot of them are overpriced. The companies that market them all have different structures to their agreements, which is why some are difficult to finance. Some of these companies have also built in very large commissions for themselves which are passed on to the end buyer and as a consequence valuations come up veryt short. Allocations for the next round of NRAS properties are supposed to come out in the next week or two, so there will be a lot of new ones around soon and not all will be overpriced.
Markymarko, your broker should have known what was acceptable to Suncorp for servicing. I hope this wasn't the same broker you mentioned initially.
Regards
AlistairHi 4jojo,
I think you should reassess your attitude toards brokers on a number of fronts. Firstly, if a lender gives you the same rate through a broker or direct, why would you pay for advice so you can do it yourself and end up with the same product. Both you and the broker end up worse off, only the bank benefits. Secondly, you do yourself a diservice if you reduce the role of the mortgage broker to being a comparison and processing service, a broker who has expertise in dealing with investors should be able to give you advice on setting up a loan structure that saves you money and best places you to build a property portfolio. If you want to get an idea of what a good broker can do with you i suggest you call Richard Taylor or one of the other great brokers on this site, you will be surprised at how much assistance a good broker can give you.
If, in the end, all you want is a loan processor, use one of the services that rebates their commissions.
Regards
Alistair
