Forum Replies Created
Hi New Investor,
I know a bit about taxi plates because my brother co-authored a large report on the industry for the State Government a few years ago. Hios take on it is that there are a lot of changes that probably should be made in the industry, but it appears that not much will happen in the forseeable future.
Most people in the industry seem to think that the strong growth in price and revenue from plates is likely to continue. I think they usually return a better % rate that what you have stated by the way.
They seem a pretty good passive investment to me as they hacve a history of steady growth and are very low maintenance. Personally, I wouldn’t buy one, but many people hacve and have made good money from them.
Regards
AlistairHi Peter,
The financing for larger projects sound pretty scary, but really its not if the project is good i.e. high profit margins. If you go in on a low profit margin eg 15% you will have trouble, unless you have very high presales or can service the end debt. If the margins are strong, 30% plus then its not that difficult.
As a rule you can lend 80% of total project costs from a prime lender (if you’ve owned the property for a while they’ll allow you to include capital growth but they like you to have cash in the project), you can take this to 90% if you use mezzanine finance, so eg you can do a $5 million project with $500,000. The funder(s)will capitalise the interest so such projects are not a drain on cashflow .
Presales requirements depend on a mixture of your personal capacity, the margins in the project and the expected time frame required to sell the finished product (this will be addressed in the valuation). There are some lenders around who will fund projects with no presales, but generally they would have to be in an established area where they can make a fairly accurate estimate of the likely time it will take to sell the end products.
I’d be happy to send you an excel template with sample figures to show you how a commercial development loan is assessed if you are interested.
I suggest you have a good look through the articles on the Metropole site also, its an excellent resource.
Regards
AlistairOzi is correct, in Victoria there are no minimum land sizes. There are minimum land sizes below which you need a planning permit, and there are numerous provisions that need to be followed such as no. of car parking spaces and amount of private open space, which restrict the numbner and size of dwellings you can fit on a block.
Some advice for anyone looking to develop, get yourself a very good architect/draftsperson with a lot of experience in designing medium density housing. Also don’t skimp on price, you are not buying a commodity, a good designer will be able to fit a larger and more attractive development onto your land, the planning application will invariably go through faster and more smoothly and you’ll get a better end price for your development.
If you have no experience in development, i would also suggest you have a chat with Michael at Metropole. Using a professional project manager will drastically reduce your level of risk.
Regards
AlistairHi Bill,
If it is a resi contruction loan, most will lend against the end value. If it is a commercial lend they will take into account the percentage of costs they are funding and the percentage of end value. This is pretty standard amongst the big banks and secondary lenders.
Why don’t you post some details of what you are wanting to do and let us give you some more specific comments on the scenario.
Regards
AlistairHi Bill,
Richard is correct, usually banks do look at what you put into any deal, but Gross Realisation value is the most important consideration. I suggest you go to a diffferent bank, or better a broker who has a bit of experience in this area.
Regards
AlistairIf your friend is serious about getting into developing tell them to find a good architect or draftsperson who has a lot of experience with unit developments. Speaking to council is fine, but if you don’t have a design to show them then nothing they say means much,
Also get them to have a look at http://www.dse.vic.gov.au and get familiar with planning schemes and zoning maps.
Regards
AlistairHi Andrew,
To get exactly what you want yopu would probably have to look out West as you would struggle to find houses in the south and east, with land content, that close to the city in the price range given.
If you consider going a little further out, Cheltenham is worth considering. It has express trains both ways and so travel time would not be too far out of the range you’ve given.
Regards
AlistairHi Picklesam,
Because Steve McKnight has used the number of properties he purchased as a selling point, there are a lot of people on here who want to do the same. In my opinion, and I’m sure many people will disagree with me, buying a large number of residential properties is not a great goal. The only particularly wealthy people I know who own a large number of residential properties are either property investment guru’s (the number is a good selling point for them) or they own their own property management business (the time taken to manage their portfolios is therefore minimised and it adds value to their business).
Residential property is a great way to build wealth initially, but my experience is that the vast majority of independently wealthy property investors are involved in development and/or commercial property. If you build skill in there areas of the market your property portfolio will self fund far more easily.
Regards
AlistairI haven’t been to one of his seminars, but I know Chris pretty well. He has been working in the Commercial property industry for over 30 years, so he is a wealth of knowledge. He spoke at one of the Wealth Creator seminars late last year, so I’m sure these was someone out there who has heard him speak.
Regards
AlistairHi Mal,
There is no minimum size, there are other conditions you have to meet that makes it difficult to subdivide below a certain size, but at the end of the day what you can do with a block largely comes down to the skill of your designer.
Much of Mt Eliza has a Design and Development Overlay which, as you stated, restricts blocks being subdivided to les than 1,300sqm, however the part of this policy that you have missed out on is that this minimum is the minimum “without a full development plan” ie if you have a 1,000 sqm block you could apply for a permit to put two houses on it. If you were successful you could then subdivide the land.
If you are interested in developing I strongly suggest you get yourself an architect or draftsperson and a consultant town planner.
Regards
AlistairI have not looked into the mining towns yet, as I am wary of the tenants.– Lots of single blokes with nothing to do after hours and plenty of money for booze => damaged property
– Many mining jobs are very well paid but often boring and repetitive. Coupled with lack of females this can lead to frustration and anger => damaged property– Most workers stay for only shortish periods => high turnover = high management fees
You need to go and visit some of these towns, I am sure there are some that are as you say, but definately not all. I visited Karratha late last year and it is definately nothing like that. Lots of families, a large number of the rental properties are leased to the mining companies at very high rents, lots of long term tennants because the money is so good.
Regards
AlistairHi Ems,
The Richest Man in Babylon is a great book, most other wealth creation books seem to use the same concepts, but are not nearly as interesting to read.
Regards
AlistairRichard is correct. It is a very common misconseption that commercial lenders will only go to 60 or 70%. The truth is that where the deal is strong ie quality borrower, tennant, property and lease, commercdial lenders are very flexible.
Regards
AlistairHi Carpe,
If you don’t open dialogue you’ll never get anywhere. Howe much info you give him is up to you, but I can’t see how you would be disadvantaged by meeting with him and opening discussions.
Regards
AlistairHi Carpe,
I would suggest you be upfront with the guy. Meet with him in person and tell him you are willing to sell, but only for a decent price. You could also offer to JV him in devloping the 3 sites together.
If he is unreasonable then just wait him out. If he is a professional developer he needs to turn his projects over, he won’t sit on the blocks forever.
Regards
AlistairThanks for your kind words Kevin.
Regards
AlistairHi Ogilvy,
Another thing you might like to consider is the use you put the shopfront to, shops in secondary locations (ie not is a major shopping strip) are often difficult to lease, but they are also often attractive to businesses such as medical practices or as offices. I strongly suggest you speak with a specialist commercial agent re what is in demand in the area, you may find that it is better to market the property for an altenate use.
Regards
AlistairAsset Loan are a public company, go to their web site and get a copy of their annual report and you can make your own mind up re their stability. They are a short term aset lender, as suggested by their name, with ratesstarting from around 3% per month. They don’t lend at high LVR’s, I think 70% is their max.
Regards
AlistairRemoved because I already know about what is on offer
One area, and it was mentioned, is borrowing. If you all go on the loan together then you will all be responsible for the whole debt individually.And to make matters worse, if one of those five goes for a loan later on, one another property in just their name, the new lender will assess them on only their share of rental income for the syndicate property. ie total debt, but only 1/5 of the income.These problems can be overcome by choosing appropriate properties and using a commercial lender who will lend on a non recourse basis, ie with no guarrentees.
Regards
Alistair
