Forum Replies Created
Talking about company names….my wife and I recently went through this exact company naming process as we are in the process of buying a business.
We ended up with ….Jolly Jane Pty Ltd. We decided using our childrens names. KeLLY JO and Reanna JANE (we removed the Ke and put the JO to make JOLLY and added our other daughters second name JANE). The business does home security in the form of security doors and window screens. That seems a weird name for a security firm doesn’t it?!?…well it doesn’t really matter because our trading name will be Starline Security… yep… boring… but I’m buying this business because it has been operating profitably and growing for many years…so why change a good thing. I may use the name later for a select target market but it will need marketing $… I reckon a cartoon female character named of course (Jolly Jane) who is a crime fighting sort of superhero…yeah I know…not very imaginative and a bit corny but that’s the best I can do. I’m hoping it will grab peoples attention and be easy to remember…it’s getting people to associate the name with good quality home security that is a difficult part.
Ok…nuff rubish from me
Ben
Hi Kiwi
I’m flaberghasted that this situation came about. More so that a bank can refuse to release a mortgage should the sale price (+fees) not cover the mortgage. I would have thought the bank would have no choice but to release the mortgage and go after the vendors for the difference post sale. Obviously this is not the case. Also that your deposit is not refunded in full as you are not the defaulter in the contract. Your solicitor should be able to recover your deposit in full….although I imagine they will take their fees.
Keep us informed of your progress as I’m interested to see where this goes.
Ben
Hey Ron
20 is young and you can recover pretty easily if things go wrong…but 30 grand is still a lot of money to risk so you do need to be careful. Plus if you borrow heavily and things go south you may actually end up owing more than your property is worth. It’s all very well to just say …go for it but you need to know your market prices very well and ensure your getting a good return.
Janets idea sounds fantastic. Lease a very large 5 or 6 (or more if you can find it) bed house….preferrably in a student zone but it could be in a high single room demand area…live in one room and rent out all the other rooms. If you can make this profitable then progress from there. Plus it will give you time to understand the financial aspects (return ratios, yield etc) while getting your feet wet in the problems encountered renting out properties.
Ben
Hi Micasa
Buying a farm for lifestyle is great. The sight, smells and country hospitality is something to treasure…..HOWEVER….if you’re borrowing heavily to purchase and that level of debt is hanging over you for a fair period of time it can become very stressful very very quickly.
Just glancing over the basic numbers gives me reason for concern.
House value = 600,000
Farm cost = 1,250,000
Difference = 650,000 …this is the cost of the business (yes farms are businesses)
Deposit = 30% or 375,000
Debt = 875,000
Interest bill @ 7.5% = 65625pa
Return = 50,000pa
Return on the business side – excluding the house value is (50,000/650,000) = 7.7%…not real flash.Now I assume that you will be working the farm and therefore will not be able to work elsewhere so your ‘business income’ is 50k. This is less than the interest bill alone on this farm….OUCH. What are you planning to do to cover the remainder and have something to live on? Thinking lifestyle is good but you need to be able to live.
Ben
Hi Andy
After reading many…many replies to this both unfortunate (negative equity…on paper) and uplifting (new baby etc) I thought I’d add my two bobs worth.
First off I agree wholeheartedly with one respondent who mentioned that you did buy the property for a reason @ $500k+. Think back to why you bought…does that still apply? Are you still happy with the place? Also, unless you sell (or are foreclosed) your loss is only a paper one and most replies I read advocate keeping the property because, if you sell, you will still have to pay back the difference to the bank (approx 50-70k) or declare bankruptcy. And bankruptcy is not a pleasant option.
Consequently I’ve seen multiple replies with the view of lowering your expenses to avoid this happening. I’ve seen others with extra income suggestions to raise your ability to firstly cover your debt load and while making your family (god bless your soon to be new arrival) as comfortable as is possible.
I believe you need to do both.
On the expenses side take on board ALL of the suggestions to lower your monthly costs. Think about what is really important and budget budget budget. If, after doing that, you find your personal income / expenditure balance sheet says your income will barely cover the interest on your home (which I suspect is probably the case) then you will need to suppliment your income or your wife will have to do some sort of work so you can put food on the table… even if she is pregnant. Sorry.
Further on the income side you mentioned renting out your unit and then renting out somewhere else. This would be an excellent thing to do ONLY if your rental cost (where you will be living) is less than what you will recieve in rent of your unit. That should add money to your income side of your personal balance sheet and also allow the biggest of your unit expenses – loan interest to be tax deductible (I’m 99% certain…ask your accountant). If the unit is new(ish)…then the depreciation schedule can help immensely in getting back income tax without having to actually fork out any cash…again accountant.
Your situation is not unique. I remember interest going from under 10% to over 17% on the first property my wife and I owned and it nearly killed us paying the interest bill. And we had new ones coming along similar to your situation. You will just have to bite the bullet and work, scrimp and save just as I’m sure most of us have had to do at some time in our lives. But there’s one thing you must never do :- Give up!
Thanks
Ben
Hi all
The forthcoming comments are not mine…I take no responsibilty for them…they are ficticious rubbish.
You don’t want to be found hey! An IBC is a good way…but difficult to get finance. Hey…if you’ve got such a big tax bill maybe you have enough money to buy your own bank and write your own mortgages. An internation restricted banking licence, one that can do the magic of fractional reserve banking and therefore lend money to yourself at whatever interest rate you want to charge yourself – (like 0.00% for instance) I’ve heard can be purchased for only $500k US in the Bahamas etc. There’s many many rules regs…most of which I have no idea about…but if your into big numbers your company/bank would employ ppl who do know. Still, you have to meet the 8% reserve rule and I’ve heard the application fees are many and your only allowed to lend to the nominated few companies / people listed on the licence…but who cares…if your doing big BIG numbers then it’s the cost of money that really matters most to the profitability of the deal. Anyway…never gunna happen…but nice to dream.
ok..back to my wine. Merly Clistmas.[blink]
Ben
Hi Dazzling
Wow…thanks for the detailed reply. Clause 1 I refer to is the first ‘special conditions’ clause that the vendor added to the contract that then said that clauses7.4(1)(d), 7.4(2), 7.6 & 7.7 of a standard REIQ contract were to be deleted from the contract.
They read:
7.4(1)(d) there will be no unsatified judgment, order or writ affecting the property.
7.4(2) The Seller warrants that as the Contract Date and at settlement ther are no current or threatened claims, notices or proceedings that may lead to a judgement, order or writ affecting the Property.
7.6 & 7.7 are too large to re-type here but basically pass onto the Buyer other similar type of risks.I was just not willing to buy a property subject to these conditions without much further investigation and most probably negotiating a more accurate clause that better reflected the ‘real’ situation rather than these catch-all clauses.
I’m not that concerned I missed this one…I know there is always another deal around the corner and this one actually gives me motivation to continue my search because now I know good deals (cash flow +ve ones) can be found.
Once again..thanks for taking the time to reply.
I’ll be back
Ben
Hi everyone
Thanks very much for your comments…I’m starting to look beyond realestate.com…and domain etc…by phoning agents and getting myself on their “buyer” list. OMG…do they try to sell me some crap but I suppose, and anticipated, they have their own agenda. So much time on the phone etc. I’m still not convinced buyers agents are the go but if anyone has RECENTLY had a positive experience (or negative experience) with buyers agents I’d love to hear about it.
I am starting to see some ‘day-one-deals’ out there…and came close with one: see my post in legal&accounting. I’ll keep looking and if I Jag one good deal per year then I’ll be set-for-life in a few years time.
oh..Dazzler is right Camden…infinite return…which is rediculous. I feel it’s more appropriate to focus on money in/out of your wallet each month/year and take ‘capital appreciation’ as a your bonus…a big bonus but a bonus non-the-less.
Happy hunting
Ben
Springer
Some one some day will take a council to court to recover value degraded from a property due to it’s listing as heritage status.
One example is an old qlder on 1200+m3 (cnr of logan and miles platting rd eight mile plains.) This would surely be a near $1m commercial site but due to heritage listing sold at auction recently for 500k. Imagine how you would feel if you purchased this property 20yrs ago…tolerated it’s dual main road frontage… expecting to be able to develop one day only to find you can’t do anything.
Ben
PS…make sure you don’t paint it the wrong colour springer or the heritage police will be onto you?!?!?
Hi Dreamer
Well done on finding and making the move on this deal back in Jan 04. They are good figures whichever way you look at them…but I’m with Mikala…Please explain why you would sell an asset putting money in your back pocket… every week…potentially for the rest of your life?
Ben
Hi Skippygirl
I have an idea what your thinking…the owners are getting desperate…price drops…agent changes…absentee ownership…I might be able to pick up this property for a lower price than what I think the property is really worth. The problem with this is that the property is only worth what the market will pay and do you really know what that is? What would the true market price be post renovations? What can you do to this property to improve it’s value. Misty’s B&B is a good suggestion. Can you raise it make it into a boarding house with many rooms upstairs and down…or would this actually remove value? Does the property have any ‘historical social standing’ within the area that you could enhance/promote? If you renovated would council slap a value sapping heritage listing on the property? To me…it just seems to risky.
One way to remove 99% of the risk from this process is to flip it. see flips/swaps etc. But that means having a buyer waiting to sign a contract with you the moment your savvy negotiation with the owners lands you a deal worth doing…very difficult if not impossible for most people not in the industry.
Sorry I can’t be more help
Ben
Hi Dan,
Well done, although I’m still unsure why you felt the need to sell these units. I’m sure you would have been able to refinance it to access the available equity (45k) you have created in this property (and to pay your father back – has he asked for a cut of the profits yet?..lol). And from the looks of it the income from the tenants would pay ALL this properties holding costs. You could have had your cake and ate it 2.
Ben
