Forum Replies Created
Or the greatest white wash of an excuse for a neglected building…”Selling just above block value”.
These are perfect for all REA’s…any problems highlighted, they shrug their shoulders and say “Hey you are getting it for block value.” all the while smiling ‘cos the asking price is 140K more than block value… [blink]
Shelley,
This is yet another of a myriad of examples where your residential tenant has simply squiggled on the bottom of the Lease, grabbed the keys and moved in.
They are in your house and literally free to do as they please. Your PM who sits in an office a couple of miles away and is accessible only during business hours cannot hope to ‘police’ this type of private activity in the home. I’m sure you expectation isn’t that high…
There was absolutely nothing gained by your PM ‘advising’ them not to drill holes in the ceiling…all of that is pretty standard stuff and always clearly spelt out in the Lease.
As with all of these residential little squabbles, the ressy LL doesn’t have any OR’s…
…that is, “you’re not permitted to…” and the common response is “or what ?? what are you going to do ??”
The only “or what” you have is to kick them out, which will definitely take time / stress and lots of cost and usually repair…not such a great “or what” is it…which the tenant knows.
Shelley, like most ressy Landlords, you have pretty much no control over this situation, or any other of the 57 other different little scenarios that regularly pop up on these boards. Check the finer details of the RTA if you don’t believe me. You are the investor – you bear the risk.
So…now your PM has conveniently dumped it straight back in your lap as they always do…what’s the next move ?? Have they offered any suggestions, or is it going to play out as usual with you having to come up with both the solution and the funds to implement it.
My response back to the PM would be “…and…your plan is what ??”
This reminds me alot of flyscreens and getting bonds back off tenants and…there’s a common thread here folks, I’m sure of it.
We have put an offer on this working farm through our company – I hope that is the right thing to have done? Does anyone know of any consequences of our company owning this farm?Vyvyen, all of these are very good questions and should definitely form part of your due diligence prior to an offer being made.
If your offer is accepted by the Vendor, I fear it will be too late to adjust anything and to borrow an apt phrase from the farming community…
“The horse has already bolted.”
Firstly Dazzling — yes I should have said about the 3k refund in the initial post – was distracted by a crying baby and had to cut it short…. not all of us have hours to surf the internet everyday – like your goodself!!!! I just read a post where you had spent the last 90 minutes surfing for commercial property! You must have alot of time on your hands. [blink]Don’t get stroppy Mei, just ‘cos I called it like I saw it. You asked for advice. Your initial post didn’t make any sense at all, but the second one with the 3K refund brought everything into crystal clarity.
In your initial post you said “anything else we can do or should we just forget it and move on”. Well my suggestion was forget it and move on. Obviously you didn’t really want to hear that. Harsh reality in the business world is sometimes hard to accept…
Also, what I do with my time Mei is absolutely no concern of yours or anybody else. You’ll note in my post in was the first time in 3 months I’d had a chance to peruse the boards. If that perturbs you…tough.
I was under the impression the point of this whole investing caper was to free up time ?? If I am in that position to enjoy 90 minutes researching further cash deals, then so be it. I shall continue to spend my spare time as I see fit, without fear or favour.
We have only received verbal confirmation that they are going to refund us. Nothing in writing.I was thinking of telling them we are not interested in chasing the $750 from the tenant so they can get moving with the GST money.
When we have the $3000 safely in the bank I was then thinking of fighting for the money as it was their fault they did not change the bond over?
I know Dazzling thinks this is a hopeless situation but anyone have any thoughts on my plan?
PM agencies don’t work like that Mei. They are quite business savvy and will not expose themselves to that which you allude.
Look, you’ve been stiffed by recalcitrant tenants who do this all the time. As a residential Landlord you are exposed to this risk…this time the risk came to fruition. Chase them through the courts if you so please, but you’ll get nowhere, as others have found. Eat the cost and move on.
In the future I shall not bother you. Sorry for calling it like I see it, after being requested by your goodself to do so !!!
Hi renand and welcome to the forum…hope you have a good time.
You haven’t asked a specific question so if you’ll indulge me, a couple of comments / queries if you will ;
1. How much extra on top of the normal purchase price did you pay for the rental guarantee ??
2. How much did you learn through the process of purchasing ?? With everything being organised for you, are you positive you got the best deal, and what lessons will you be able to glean for next time.
3. The people you’ve used to handle all of your transacting, including wealth creation plans, are they all completely independent from the developer who sold you the units ??
4. These demanding careers of yours, how much after tax wealth do they create compared with your expected increase in equity, with these two and perhaps subsequent purchases. Based on the answer to that, do you believe you are spending your most valuable resource – time – focusing on the most productive activity.
5. Looks like you’ve chosen to pay interest rather than tax – well done. Either way, if you are entrenched within the Australian taxation system and earning taxable income, you can’t keep the money, so you may as well get something for it – the promise of a capital gain…maybe.
Hope you had fun during the process – will you do it again ??
Whoops….just re-read your first line…I missed the “thinking of buying” bit…another question then…
1. What else have you looked at and how does it stack up compared with these units, before you dip your toe in ??
We also looked at the fact that if the relationship does not work out, we still have an investment property.It’s not real clear, but I presume that you are not talking about your relationship with your daughter, but your daughter’s relationship with some unnamed third party ??
Do you want to specify exactly what your situation is…are we talking about some 30K tin shack or a waterfront mansion…it will probably influence the choice you make.
Dollars / ages / experiences / competencies / strengths etc…, you’ll probably get a more informed suggestion.
Great to hear from your Gatsby…what work are you doing exactly over there ??
Did you take your barbell and bench press over there with you, or are you lifting enough heavy things…how’s the diet ??
Hi Anita,
A few things I’d check before proceeding ;
1. If there is a 5 yr lease in place, the CIP should be sold as a “going concern”, and hence the asking price should be 169K only…no GST applicable.
2. The rent appears to be 7.7% gross, increasing at CPI. I’d be very wary of what your nett rent is going to be, now and in 5 yrs time. You say the outgoings are currently $ 47 p.w. I’d be asking exactly what you get for this…CR / WR / LT / Ins / Strata fees etc. For $ 2,444 p.a I don’t think you’ll get all of those paid for. Strata fees are the big unknown, but I reckon they’d come close to that figure just by themselves. Over the years, I think those outgoings will accelerate way faster than CPI, and hence I think you’ll find your nett rent will decline.
If I had to have a stab in the dark, I estimate your nett rent in Yr 1 would be about 5.0% nett, and suspect this would decrease over the years, which would be very unattractive to potential suitors in Yr 3 or 4 if your intention is to unload.
3. The dropping in nett yield will really affect your cap. gains as your land component is minimal. The value of little CIP’s with no land component are heavily tied to the nett yield they can command.
4. Who really ‘runs the show’ in the strata group. Will you be a minor or major player in the group ??
5. Given it’s only 8 months old, your depreciation should be high, but then you are paying for it in the asking price, and you’ll need to start a sinking fund. The Govt doesn’t allow you to claim depreciation for nothing. They do it ‘cos they recognise it’s costing you money in the long run to replace / repair the asset. If your intention is to sell it in Yr 3 or 4, claiming the depreciation has no great impact.
6. Finally, no I don’t think it’s a reasonable deal. I believe the nett rent should be a tad higher and should trend up, not down over the due and punctual performance of the Lease.
Good luck with your endeavours. Negotitate your sox off.
Len,
Mathematically, if you are trying to divide something by 0 you get infinity.
In this case the % return is a joke and best to forget it. Concentrate on the numbers, not the ratios.
Our latest deal did as you describe, borrowed the lot plus expenses and it is +CF…but working out all of your CoCR and all of that other accounting toss is great if you have time and playing with ratios, but it means squat really.
Get on and go get the next one for the kit bag.
Cheers mate.
Well that adds quite a new slant on things doesn’t it ?? Anything else relevant to the situation…’cos that 3K GST refund was a biggy, and makes the whole handling of the bond situation by the PM make perfect sense now.
I’d suggest the agent has you completely over a barrel, and therefore you have lost all control in the matter. Your PM and her agency / principals are in a very strong position…just the way they like it when dealing with Owners.
It looks like they’ll try for the bond, but if they don’t have any luck or it drags out, they’ve got your 3K to drawn upon. Beautiful situation for them. I’m not surprised your PM is saying she wants to “sort it out” before giving you your 3K.
As with all people in a situation where you have not a jot of control, pointless asking the forum what you should do…simply smile and take what’s coming to you. When everyone has ravaged the pot of money and taken what they deem to be correct, you’ll be left with whatever is left.
Too late with this one…eat the cost and take the lessons learnt. Gotta love those ‘caretakers’.
Big question is – do you plan on putting yourself in this situation again ??
Originally posted by landt64:Hi Dazzling,
I read a lot of your posts, and it sometimes appears that you are quite scathing of investors who buy residential property. i do remember an earlier post of yours that talked about your father-in-law telling you that commercial property, and not residential was where to make money. Since you seem to think that residential is not the way to go, you could perhaps give us some pointers on how to get into other markets. Maybe you could tell us how you got started. I’m sure others would find your input invaluable.
Thanks
Landt.Hi Landt,
I don’t want to sidetrack the thread. Apologies.
1. I must appear to be scathing, because you’re not the first to pull me up over this point. I don’t mean to be, but when I challenge the common held belief that all residential property is good to invest in, I suppose it ruffles some feathers. Granted, compared to cars and lollipops and icecream and TV’s, they are great…but that doesn’t mean that are top of the tree. Some people are getting amazing growth and decent yields off their RIP’s…great stuff I say…more power to you.
2. Despite my objection to them, and my policy not to purchase any more, I still classify myself as a residential investor due to the weight of them in our portfolio…so I’m in the boat as with everyone else. I just wish Banks wouldn’t value them higher security wise than other props, especially other props that are mainly land based.
3. Landt, what I’m truly scathing of is investors who have a whinge about all of the inherent problems associated with RIP’s, but are not prepared to venture forth and try a new flavour. Whinging about high cost of Land Taxes, having to put up with nett rents around the 2 or 2.5% mark, heavily stacked RTA against the Owner, high maintenance costs, high turnover of 6 monthly leases, fixing tiny little incidental things and generally having to wipe the tenant’s noses all the way. It comes part and parcel with RIP’s…my point is if you don’t like putting up with all of those things…don’t buy ’em.
4. It was my wife’s uncle who actually whispered in my ear “Once you’ve finished mucking around with those houses, have a look at commercial”. I was scared witless of the advice, and completely ignored it for over a year…as was my right…as it is any investor’s. I was scared because I believed all of the tripe written by RIP experts about the risks involved with CIP’s. Once I overcame my fears and debunked the experts opinions that had prejudged my views, things started happening. I remember the first time my father and I sat down and read the lease documentation for our first CIP…we both burst out laughing and couldn’t believe tenants would actually agree to all of the onerous conditions placed on them. Coming from a RIP background and RIP mindset, we were astonished.
5. Pointers and tips on how to get into CIP’s…hmmm…and detail how I got started, have a squizz at some of my posts in the Tell Tale section. I spent a good deal of time writing it all down…it’s there for all to see. I have nothing to hide, but on the same token, couldn’t care less if no-one believes me.
6. My wife thinks I’m crazy spending so long on this forum and wants me to pull out. I’m happy to oblige her if people find my opinions “against the grain”.
7. Have a chat to Pickworth, M. Yardley, Steve, Qld007, Dr X and Simon and a few others, CIP’s are not the big bad scary monsters that they are constantly made out to be.
I would like to think that all employers are humanMunjy, I think you’ll find most employers are not human. Their surname is usually Ltd or Pty Ltd and hence “feelings” and all of the emotive stuff trying to be introduced to bring it back down to a human level, is very very difficult to fit inside the Financial Director’s excel spreadsheet where s/he types in the formula into the cell.
I don’t work in Australia…so perhaps my opinion doesn’t count…but I do vote…but I don’t live in a marginal seat…so perhaps my vote doesn’t count either [blink]
Hi,
By your question I interpret you mean the residential housing markets in Sydney and Melbourne and maybe Brisbane. I have no clue about these ‘markets’ whatsoever, but I suspect if you pick through the bones you’ll find some gems even here..
Fortunately, there are many markets that have nothing to do with those mentioned above and they are zipping along quite nicely.
So, from my vantage point, I’d say ‘the market’ has been in a ramp up for the last 2 or 3 years and is booming right now !! (in the last 6 months we’ve seen dramatic evidence of this) and are glad we’ve jumped in boots and all.
Given the long (20 plus year) contracts being signed for the mining and oilfield sectors, I reckon this boom we are currently experiencing will continue for quite a while yet.
Woohoo…
1. Locate and purchase absolutely disgusting, filthy neglected hovels with lots of land for very cheap prices.
2. Get friendly with a bobcat driver and use him and his truck to clean up the mess.
3. Negotiate and sign up Lessee’s on decent terms.
Hi Jen, good to hear from you. What’s up ??
The wife and I are trying to be as self sufficient as we can possibly be, mainly to get all of the lessons learnt (there’s a few) in the kitbag for future deals.
Not for everyone mind you, but this is what was involved ;
1. Purchasing – dealt direct with the Vendor, no agent involved (he was in hospital sick).
2. Financing – dealt direct with the Bank, no broker involved (our analysis came to the conclusion they couldn’t compete).
3. Leasing – dealt direct with the Directors and Owners of the companies over in Sydney, no Leasing Agents or PM’s involved (got higher rent and better terms than they could have).
4. Negotiating – dealt direct with their big company solicitors (a harrowing experience, but we stood fast and got everything we wanted).
It’s been a busy little period, and the thought of a holiday is looming large on the horizon.
Hope to see some of the other great deals no doubt being done all over the country and beyond.
Sorry for imposing on your thread Westan.
Cheers.
Hi Westan,
Great topic.
Our last deal that settled 6 months ago looked a bit like this.
Capital
Purchase Price….$ 2.27
Loan……………..$ 2.39 Borrowed the lot, plus expenses
Interest………….$ 171 K p.a. (7.15% fixed 5 yrs)
Land Value………$ 2.10 (92.5%)
Buildings Value….$ 0.17 ( 7.5%)Income
Just signed up two separate national companies as Lessee’s, both on 4 yr leases with 2 yr options, all on 4% p.a. escalation clauses
Tenant # 1 pays 90K p.a. plus GST plus all outgoings
Tenant # 2 pays 84K p.a. plus GST plus all outgoingsOur prime focus is definitely the capital growth of the land and it’s future development potential. Two acres 4km from Perth CBD. The land has averaged 12.9%, compounded annually over the past 41 years, so we are confident of getting close to that over the next 41 years.
However, the deal is slightly cashflow positive in yr 1 (+ve 3K p.a.)…it gets better as time goes by (+ve 49K p.a.) in year 6…not bad for something that we consider to be Landbanking.
After yr 6 we’ll probably put Billy the Bulldozer through the lot and build something decent up that rents it’s little sox off.
Cheers… [blush2]
Yeah fernfurn,
Had this happen before to me as well.
Back when I used to buy houses the agents would always ask with a smirk on their face “What do you intend doing with the place ?? Are you going to live in it or is it for investment ??”
Foolishly I answered them in the early days, and summarily got kicked in the teeth too many times by them. After a while i just said,
“Look, what I do with the property after settlement is neither here nor there to either you or the vendor. They’ll have their funds and you’ll have your commission. What relevance is it to you ?? Now please, stop asking me questions and tell me everything you know about this property that you are representing.”
Thankfully with what we target nowadays, I don’t get asked these prying questions and there is no touchy touchy feely rubbish to murky the transaction.
Don’t let the squirrels pepper you with questions. You as a buyer are a walking bag of cash. They don’t need to know anything about you. Answer their questions and you shall need to fork out more.
Fantastic story flatout….I really enjoyed that and related to it very closely with our own journey and relationships along the way.
We both started off in meaningless labouring jobs, saw that wasn’t leading anywhere fast and said goodbye to all family and friends and choofed off to the other side of the country and both picked up valuable degrees on which to build careers.
We also have had fantastic encouraging support from family members when we were ‘down but up and coming’. Over the years that support has transformed into a weird sort of quiet and snide resentment from family and friends.
We’ve found people are very happy to pat you on the head and support you when you are economically not as ‘large’ as them. When you grow (usually through damn hard work, persistence and plenty of sacrifices…time, raggy depreciating material possessions etc…) above their ‘station in life’ suddenly that pat you on the head syndrome fades away and it becomes ‘every man for himself’.
A couple of years of growth down the track, and that rivally turns again from equals to they give up and the bitterness / jealousy / attacks start and she usually goes downhill from there.
We are now to the point where family and friends ranging from our peers to people 30 years our senior are seeking our advice / comments on how we did it.
Thankfully the jealousy and bitterness have ceased, and we are all on great terms again. There is now just a quiet shaking of the heads in disbelief at our companies activities.
We offered members of the family to join our journey, all steadfastly refused years ago and all now regret not having come on board.
Anyway…people have different priorities in life…whatever turns your crank handle hey ??
I think that you can tell a lot about a person from their car.Absolutely…and I’m only 30 days away from realising my dream of purchasing a beat up 1960’s F150 with all of the extras…like scratched panels, rusty hinges, uncomfortable bench seat, big wide mud tyres, cobwebs on the side mirrors, worn through floor matting and a really uneconomical sluggish 351.
$ 4,000 and she’s all mine. Beauuutifuullll.
Connecting the sewer would be handy but would it make the property more valuable?Connecting the large block to deep sewerage makes it more valuable…you need the title on deep sewerage to do any development.
My understanding from the Water Corp. brochures we received when it went through, was that you had a 5 year time limit in which you had to pay a plumber to connect to it.
Regardless of whether you connected to it or not, as the facility was running past your title, they charged you the much higher water rates applicable for the sewerage as opposed to the septic tanks, so it made no sense not to connect to it.
If you are forced to pay for it, you may as well enjoy the upgraded facility.
