Forum Replies Created
I can recommend Bruce Whiting, business name 'Business Artisans'.
Nice guy and knows his stuff when it comes to structures and all things property.
Thanks Richard and Paul.
I will look into it.
Cath.
Hi Richard,
Thanks for your reply.
I don't have a credit license and am under the impression that I would need something like this if I was doing sales instalment contracts but not for Lease Options. I am working with Tony Cordato for the legal side of things and he has not mentioned the need for a credit licence.
So I guess the next question is, are you suggesting this because it's a legal necessity? Or because it would make it easier to talk with potential investors if I had the licence?
Cath.
A few years back I bought 3 properties in small mining towns in WA.
In one of the towns, everything that could possibly go wrong did.
- The mine closed down.
- The 'property manager' recommended by the real estate agents turned out to be a crook whose idea of good property management was to collect rent from 50 houses but not pass it on to the owners.
- The guys that looked after maintenance left town.
- My property was vacant for pretty much the entire time I owned it and was broken into multiple times.
- It was uninsurable.
- The mining company decided to dump their entire stock of housing on the market at any price they could get for it.
- I sold it a little while back and had to put money in to allow the sale to go through! OUCH!!! However, I still pinch myself with relief that I no longer own this nightmare property.
The other 2 properties, in another town, have fared much better. They have still been challenging, but nothing like the first one. I have long term tenants in one of the properties who want to buy it and therefore treat it like their own. The other property is lower quality and the level of tenant has reflected that.
Both those properties have theoretically increased in value significantly, however there are currently no sales comps because the agent (from a town 200km away) who was servicing the area suddenly disappeared and it took a while for another agent to succumb to the pressure to take on this place.
Personally, I would not invest in a tiny mining town again. There are so many challenges to overcome and everything is difficult because tradies and supplies have to travel a long way. Plus, mining companies seem to pull in and out of these towns on the slightest whim.
Having said that, there are also some upsides so I have had some fun along the way.
- The people are WAY different to your average Jo.
- Tenants understand that a mining town house will not be the same as a city house. It is NOT uncommon for tenants to organise repairs themselves then just casually tell you in passing.
- The locals are very friendly and helpful. Once you befriend the right person, you'll get random texts saying things like "hey I notice your house looks pretty quiet, do you want me to go and check if your tenant has done a runner?"
- The cops and the people in the shire will actually tell you stuff you need to know.
- The towns themselves are pretty funky and quite fun to visit for maintenance trips. Having dinner in the local pub after a hard day of work is…..memorable. If a groovy modern song starts up on the jukebox, one of the locals will go and hit it, and everyone else will cheer. You will be the only one who wished to hear that song, so naturally you will stay very quiet.
Hi Kiwi,
The numbers you have plucked out are pretty much exactly the same ones as I did when I first looked at this. I too came to the conclusion that the 20-30% that was suggested seems on the low side, and that 50% of the equity increase would make sense for the tenant. However I am looking forward to talking to the guy that is actually doing these.
Actually now that we mention it, are you doing these? Your website focuses only on the lease options, are you doing equity leases too?
I would think that the way to go would be to refinance, and hold onto the property. That way, you would have been neutrally geared for the 5 years, and at the end of it would have an equity stake which would grow considerably from that point on.
Another question for you Kiwi, on the paperwork for the lease options. I did one of these a couple of years ago, but I had a heck of a time getting the legal side of it together. I went to a lawyer who wrote me complete gobbledigook, which was unusable, then I was shown a couple of other agreements that were being used by other people. In the end I used the 3 examples as the basis for writing my own, then the tenant wanted a couple of alterations made as well!
I was not particularly confident that this was the best result, since I'm not actually a lawyer myself. I never had to test it in court, but I wouldn't have wanted to.
So my question is, how did you get your legals sorted? Did you use a lawyer and if so would you mind telling me who?
Many thanks,
Cath.
Sounds more than fair to me
Hi Mr Fair Go,
Ouch! At first I thought you meant you were BUYING at that price, and was wondering why you were so bummed, lol.
I haven't got a definitive answer on the percentage yet, but it sounds like it might be in the vicinity of 20-30%. Will let you know more when I find out.
I don't know what would happen if the property went backwards, but would imagine that nothing would happen. You couldn't get a tenant to agree to pay high rent then take a share of any equity slide! I can only say that if you bought a house that lost value over 5 years, it could probably be said that it was poor buying.
Regards,
Cath.
Hi George,
I've bought property by private sale, ie not involving agents. Sold it that way too. It's easier than many think.
I'm in WA, and I can go to any newsagent and get a copy of the REIWA offer and acceptance contract and use that. The only difference between it and the ones agents use is that it doesn't have an agent name at the top of it.
If you know your way around the form you will find it easy enough.
Basically, the ball is in your court, not the seller's. You're the one making the offer, so you get the form, you find out how to fill it out if you don't already know, and you take it to them and get them to sign it. Then you give it to your settlement agent (or equivalent for your area) and they take it from there. That's all the agent does.
If you don't know your way around the form, go and get a few speed lessons from your settlement agent and/or friendly real estate agents, if you have any. Find out about things like:
Where, if at all, to mention furniture, chattels, light fittings, fixtures and fittings, window treatments, and aerials.
How to put your name or entity in.
How to put in nominees, if using them – make sure you use and/or between names, not just and. Ask me how I know….grrrrr….And absolutely do not leave it up to the seller – as a professional property investor, I handle this form whether I'm the buyer or the seller.
Cath.
PS Aerials is not a particularly standard addition to RE contracts, but I think it's good to specify that the contract for sale is inclusive of the aerial. Technically, it's fixed so it's a fixture, but I did have a guy make off with one once.
I have done a couple of relocated houses, so have come up against the asbestos thing myself.
The generally accepted wisdom is that asbestos is safer if it is left undisturbed. So if you have asbestos in your house, and you do not have to remove it, it's better to just leave it rather than removing it just because it is asbestos.
It's dangerous when it's cut or damaged, which is why you have already been advised to paint it. If it's painted, any loose fibres found around damaged areas are sealed in.
If you need to remove it, you need to wear the correct protective gear, including a mask rated appropriately. You shouldn't use power tools at all, which disperses fibres all over the place – do it by hand. All asbestos needs to be wrapped in black plastic and taped shut, then taken to the tip, where you notify them it's asbestos. As far as I can make out, they then shovel it into a hole with a dozer of some kind, busting open the plastic and spreading asbsestos fibres everywhere.
Our council requires any buildings coming into the shire to have the asbestos removed beforehand, and I did one of those. It was a big job.
Another useful month/week thing to bear in mind is that there is, on average, 13 weeks in any 3 month period.
It's not something that comes up that often, but I find myself using it occasionally.
It's amazing how many people take the old "there's about 4 weeks in a month" trick and multiply it by 3 to get 12 weeks in 3 months, which is just not right.
Gosh things got a bit heated here for a few moments, didn't they?
The problem with tongue in cheek is that one can't see it in writing. And we all know the problem with firing off a quick response.
Matt, I would think that with 900 000 in the bank, you have many options open to you if you want to make 150 000 a year. I have recently been looking at a company that "is a boutique fund manager focusing on investing in Australian listed shares and securities in a tax effective manner." (I just lifted that from their website).
They have been achieving returns of 30-40% per annum, which in your case would mean a return of 270 000 to 360 000 per annum.
So you might want to look at a combination of tactics. I mention this because your original post does not specify that you only want to look at real estate, though obviously the fact that you're here indicates that.
I think the advice to further your education is also sound. If I were in your situation I would attend a variety of courses by different presenters. I would look at real estate as well as other investments and businesses, and I would definitely look at personal development – investing is 90% about what's going on upstairs. You have the means to develop yourself into a really noteworthy human being, and you will offer a lot more to both yourself and the world in this way.
Cath.
Hi Nucopia,
And there you have hit the nail on the head. I said I wanted to borrow the money from all those people, but Today Tonight said I was asking people to 'give' me money. Which is quite different. What I was aiming to do was borrow from individuals rather than banks, but I suspect it didn't make quite as good a story.
Unfortunately, this subtle change was not to my advantage, as you quite rightly point out.
I have indeed learned a lot of lessons from this journey, and continue to learn. I could never have foreseen some of the experiences I've had! I don't mind having been a bit mental, one thing I'm learning as I go along is that sometimes doing things a bit differently works. The other thing is that I'm not going to be right all the time. I'm looking for that quote about success being what happens once a person continues past a series of 'failures', or learning opportunities. These ones sum up the same idea:
It doesn’t matter how many times you fail. It doesn’t matter how many times you almost get it right. No one is going to know or care about your failures, and neither should you. All you have to do is learn from them and those around you because… All that matters in business is that you get it right once. Then everyone can tell you how lucky you are.
Mark CubanWe all have to decide how we are going to fail.. by not going far enough or by going too far.
Sumner RedstoneSuccess is not built on success. It's built on failure. It's built on frustration. Sometimes its built on catastrophe.
Sumner Redstone
Failure is the opportunity to begin again, more intelligently.
Henry FordHi Richard,
Thanks for the info. This is food for thought – I have been advised that if I am putting together a joint venture deal with just 10 people, I didn't need to worry about the prospectus thing.
But this information casts some doubt on that. Did you copy it from the ASIC website?
I don't have a lot of confidence in phoning ASIC direct – they sent me a letter about something on my website in the last couple of months and when I phoned them the advice I got was inadequate, to say the least. They were not able to answer questions about the very thing they had raised themselves as a potential issue.
Their modus operandi in that instance was: 1) They sent me a letter alerting me to a potential problem. 2) I phoned them for clarification of the issue, and to clarify what I was doing. 3) They asked me to send them a letter outlining my position. 4) They wrote back and told me that they couldn't tell me if what I was doing was ok or not.
So it was basically "you might be doing something wrong for which we might penalise you, but you'll have to figure out for yourself whether or not you're doing something wrong, because we're not going to tell you." It seems to me a bit like a football game where the players have to kick the ball into goals that are not marked.
Cath.
I had a vendor make off with one once, so I did the investigation and found out that in that case he was not entitled to it, and I was, as the purchaser.
As part of that research, an experienced real estate agent told me that they now always include antennae in their contracts because it is not necessarily black and white.
I'm in WA, so I don't know if something about our contracts is different to other states in that respect.
Cath.
Hi Tysonboss and Else,
Landbanking as I understand it, and as I am using it, is buying land with the intention of subdividing it later. In my case, the land I am looking at is zoned rural, but when I look at its location and what is happening in the rest of the area, I believe that this will change in the future. So if I were to buy the land right now, which is what I am attempting to do, I could not do anything with it other than graze some cows and live in the house. However, in a few years time I could apply to the shire to have it rezoned, and if I were successful, suddenly I would have a whole different scenario on my hands. If I were to buy the land after it had been rezoned, it would be a lot more expensive.
As a real estate strategy, it has an element of risk. Will the land be rezoned? And if so, how long will that take? On the flipside of course, the rewards are high if the strategy pays off.
The basic premise is – buy acreage on the outskirts of town, and wait for it to become part of the town.
Nucopia – You're almost right – I was featured on Today Tonight about 2 months ago (time flies…). At that stage I was looking to raise the funds to buy the land myself, and was looking to borrow $100 each from 27 500 people. And yes, I want to build a circus training facility for our local youth circus school so they have a proper place to train. It was a pretty crazy idea and I had a huge response from the tv appearance, but I only had 90 days to do it and at Day 40 it looked a lot to me like Day 90 was on target to arrive before the money. So at that point I thought "right, I'd better drop the idea of buying the whole thing myself, and get some other people in to buy with me."
I still want to build the circus school there, and it is my feeling that when the consortium goes to the shire seeking approval to subdivide, we'll be able to get kudos points for a) making a contribution to the community by providing land to the circus school, and b) protecting a large portion of high quality forest on the block by donating it to the government to add to the adjoining national park, or retaining it as public open space, or whatever.
Like most shires I think, ours is very reluctant to convert rural land into more housing, and environmental concerns are paramount. I have never done a subdivision project before so no doubt there is plenty to learn ahead, but it seems to me, from conversations I've had with all sorts of professionals and otherwise, that creating solutions with multiple wins is much better than just barrelling in with a "we want to chop up this land and make squillions" request.
I'm trying so hard to answer your questions without being a veiled ad – how am I doing, do you think?
Cath.
'A veiled ad', chuckle chuckle. Seeing my blog URL listed under my name like that, I can see what you mean.
Although I am obviously searching for investors, I honestly do not want to get into trouble for doing the wrong thing, because I would like to become a regular contributor of this forum, the existence of which I did not know about until today. So I'd rather ask the right question, which is not a veiled ad, than the alternative.
Perhaps I should have asked this question – "How do I find investors to do joint venture deals?"
That's the crux of it. I have done a couple of small joint venture deals already and the people I JV'ed with were people I knew. But what do people do when they want to start putting together bigger deals, and they need more (and bigger) investors?
Cath.
PS Richard, I'm pretty sure that with a maximum of 10 people joint venturing together, it's not a managed investment – do you know something different? That's the advice I've had to date, anyway.
When putting in offers, I now add TV antennae to the blurb about fixtures and fittings and lightfittings and window treatments, etc, because it does seem to be an area of some contention.
If you have not yet put the house up for sale, and you want to take the antennae with you, you can ensure that it is put into the offer and acceptance document that the antennae is not included in the sale price.
I would question the wisdom of doing it though. You may find that the amount you'd lose from the sale price would be more than the cost of a new antennae. Then again, maybe not.
Cath.
