Absolutely not Clones. Never – not once – have you ever heard me talk about ‘the market’ or other high level musings.

I am very much a “down in the weeds” type of investor….head down, nose to the ground, scrounging through the myriad of dross out there in ‘the market’, sniffing out that elusive unloved diamond in the rough.

I have absolutely no idea what the view looks like from up there in the stratosphere where all of these ‘experts’ and market commentators posticulate. What I do know is that the massive variety of property that I scour over to find the roughies, can never be lumped into one figure. It is a complete nonsense.

Furthermore, as I’ve written before, one cannot buy ‘the Sydney 4×2 market’, or ‘the Melbourne apartment market’…so what’s the point of endlessly writing and wringing your hands over it. My suggestion would be, why not concentrate your efforts on purchasing those props that do not conform to ‘the market’ average quoted and instead well and truly outperform. At least your actions can slightly influence the outcome.

Looking at the overall market at worrying about it is akin to worrying about fuel prices….it maybe a concern to you, but there ain’t a damn thing you can do about it….howza about concentrate on your own little vegie patch where you have some influence.

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”

Good afternoon luan,

My experience has been that a ‘normal’ transaction (where a reasonable unfussed vendor meets a reasonable unfussed buyer) usually crosses the line…i.e final agreed purchase price at about 94% of the asking price. I have no hard data other than my own personal transactions to back this up. Stats orientated people will have a field day here….

Anyway, I see your potential deal looking something like this ;

Capital

Purchase price = 0.94 * 950K = 893K
Stamp Duty ~ 36K
All other purchase costs ~ 12K
Loan applied for (100% + costs) = 941K
Interest at 7.20% (comm. loan) = 68 K p.a.

Income

Gross rent = 57 K p.a.

Costs

Holding Cost = 68.0 K
Shire Rates = 4.5 K
Water Rates = 2.0 K
Land Tax = 6.0 K
Insurances = 1.5 K
Prop Man Fees = 4.8 K
Maintenance / repairs = 3.0 K
Total cost to own = 90 K p.a.

Cashflow of prop = 57 – 90 = -33 K p.a.

Tax deduct. @ 40% = 13 K p.a.

Depreciation….who knows….

You must chip in after tax about 20 K p.a. ($ 380 p.w.).

Your breakeven point is 20/893 = 2.2%.

That is, your potential capital growth must be greater than 2.2% for your gains to offset your definite cashflow losses.

On reflection, the deal looks pretty bog standard for most residential deals. Nothing special, but not that bad either.

You state you believe it is in a good location…is that what the REA told you, or is that what your independent verifiable research has uncovered ??

Biggest issue I see is managing that many tenants and being forced to delve and swim in amongst their personal and trivial affairs. It affects your returns enormously….yuk. Not for me.

Probably your biggest upside would be to tart the prop up and apply to have it strata’d. You’d have to make sure this “potential” hasn;t already been built into the asking price…otherwise you are handing most of the profit to the vendor…and poor ol’ muggins has to do all the hard work. Fall back on research as usual.

None of the above is advice. Do your own checks.

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”

Hello chaps,

Just saw this thread for the first time and noticed I’d been mentioned in passing.

If you’ll indulge me, a few comments ;

1. Theoretically speaking, I believe the method proposed by GR definitely has merit and is way better than sitting on your bum in a lecture hall passively listening to someone up front. The main reason I say that is that your hard earned is “at risk”, which always wakes you up and keeps you on your toes.

2. Practically speaking, I see the operation not going anywhere as two issues come to the fore.

2a. The first is a lack of trust / awareness / familiarity with people spread across the country, bringing different philosophies to the table, which is great for diversity, but a hinderance for consensus at decision gates. The exact legalities of the ‘arrangement’ would be a tome.

2b. The second issue would be the smaller players wanting…probably rightly…to have a say in things as both their money is at risk and wanting to learn all of the ins and outs….the very reason for the exercise in the first place. How do you include 8 to 10 people spread around the country in a hardball verbal negotiation with a motivated vendor on the phone to cut a deal, similarly with leasing it out to a tenant. Does the senior mentor sit back and let the junior players get crushed in the negotiation just so that they can learn, or do they step in at the crucial moment, deny the junior player the opportunity to learn but get a better economic deal for the group ??

3. Being a ‘mentee’ – if that’s a word – I’m definitely not qualified to play any type of mentor role. [dunce] You need to get someone who is good.

4. I don’t think our group specializes in anything at this stage. We are currently learning about industrial properties and have purchased a few. We’re still undecided if this is what we will specialize in. The bright lights of the CBD office blocks look pretty snazzy….but we know bugger all about them.

5. With me being out of the country most of the time, and the time in the country already allocated to doing family things with the kids and keeping a tab on what we run already….I’d have to give it a pass.

6. If it’s going to work, I’d suggest keeping the group members in the same demographic, so you can practically meet up every now and again. Some techno-phobes don’t agree, but I reckon human face to face interaction is where all the best deals and dealings are to be had.

Good luck with it all if it gets off the ground.

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”

Looked at buying a big gym in Northbridge about 2 years ago. Numbers looked really attractive, and the tenant looked good (10 yr lease, big rent).

Only thing that stopped us was the size of the land, and hence the land component of the deal was less than our criteria allowed. In the deal you were paying alot for the lease.

Anyway, with perfect vision hindsight I think the deal would of treated us OK, but we were happy with what we went with instead.

I have no opinion on the resi sector of Northbridge…know nothing about it.

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”

You walked away with everything then…

Tips

1. Get the plumber to go through and replace all of the washers in the prop. when they are called out. Our plumber charges $ 65 to arrive, and $ 3 per tap washer changeout – so get him to do the lot. One call out fee is worth 22 changeouts !!

2. If you are there and have some time available and are physically able, dig the trench for him (once you know where he wants it to go) so he can efficiently go about laying the lines and doing the actual plumbing. I don’t consider $ 60 / hr for a fully qualified plumber to be digging sand money well spent…hey I’m not that rich yet…plus it’s good exercise, gets you off your bum and out there sweating.

3. Get chummy with a plumber who does both normal plumbing and gas fitting, to keep consistency amongst your trusted tradesmen.

4. Pay their bill pronto. You never know when you are going to really need him. I reckon calling him at 3am to fix an emergency and save thousands of dollars worth of damage….as he sits up out of bed, your payment history will most likely cross his mind and determine whether he flops back down or gets out of bed.

5. Offer him a cup of tea when on the job site. They are all human and appreciate being treated nicely.

Disaster stories

I’ve got one from the ol’ School of Mines student days up in Kalgoorlie when we were renting a house from a dodgy Indian Landlord. It involved a small sewerage breather pipe in both the bathroom and kitchen !!! It ain’t pleasant and probably not suitable for this forum, but suffice to say when you pull the plug on the bath and the septic system is full, somethings gotta give.

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”

Hey Andrew,

I believe the speed of your accumulation will be largely dictated by how much your wife and yourself are prepared to sacrifice your lifestyle standards now…to improve your general lot in life later. Having no children at this stage may help this.

I’d suggest you sell your PPoR and try and extract as much as you can. Say you are left with 115K after the washup…

I’d take this 115K and go and buy the smallest dump in NSW that had a land component and really grotty hovel on it. I may be way off with my NSW values, but can you pick something up for this and pay it out in full for 115K ?? If not – take the smallest loan possible….surely you can buy a dive 40 or 50km out of the CBD with land for 150K.

Anyway, despite my lack of NSW R/E knowledge…you get my drift…really rock bottom type housing. Knuckle down and improve the dwelling on your private time for minimal cash outlay so that it is half decent.

Immediately take the hopefully paid off title deed to the bank (or if you have a small residual mortgage use the most equity you can) and leverage yourself to the max with Mr Bank (go the broker route probably).

You should be able to buy something in the 400K region with a LVR just under 80%.

Now you’ve got over 1/2 a million in dirt working for you.

Get your good job back so serviceability is OK.

Now you are in the right tax friendly regime. Start investing and away you go. Give it a few years and upgrade the PPoR into a nicer area when the kids come along. Lifestyle is going to take a big hit meanwhile and you’ll have everyone telling you “This is a dive and what the hell are you doing living here”. You’ll probably lose all of your “posho swanko” friends.

Anyway, that’s what we did and it worked out OK. We stayed and gritted our teeth in Drossville for 3 years. Looking back it went like a flash, and in fact alot of the people in the suburb, especially the older folk, were really decent people.

Once again….what and how much you and your wife are prepared to sacrifice now in terms of living standards will determine how quickly you can get up into the good stuff.

Good luck.

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”

Definitely not the lag effect Simon. That implies that WA does or has follow/ed the Eastern States. We are quite independent over here us lot…economically carrying all of you Admin type people over there in the East

I think it boils down to us digging and drilling the beejesus out of our state and shovelling off the resultant product to lands afar that are prepared to pay buku for it, and be locked in for a long time. This creates not only growth, but stable growth. (I suppose it creates a few big holes in the ground also ??)

WA didn’t enjoy the massive upswing you chaps in NSW and Vic enjoyed in ’02 & ’03 (notice we didn’t bleat and whinge about that at the time). Now you are either levelling off or dipping slightly, with WA still chugging along nicely…everyone over there is carrying on like pork chops…oh whoa befall me….cheer up guys…I think in the great wash up you’ll still come out in front.

In short, resources is where it’s at – at the moment. And you guys don’t really have much in comparison. There’s only so much paper shuffling that needs to be done (law / accounting / insurance) that you are so good at in Sydney.

Swap the pin striped suits and pens for checked shirts, hard hats and hammers and see the profits roll in.

Go West Ozzy !!!!

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”

I’m finding it curious that a few people are saying their builders are quoting them more for colorbond and a few others are saying their builders are quoting them more for tiles ?? It’s obviously not that simple…like most things in life.

Having never gone through the process of building a new house, it’s all hearsay for me.

My main criteria would be to choose a roofing product that gave the best chance of keeping the water off the dwelling. I find more and more that if I look after the roof and stop the ingress of water, the roof will look after the rest of the house. I’m finding rectifying the problems caused by the ingress of water are the most costly, both from a time and cost point of view.

When buying an existing building, the roof, it’s material and condition receive a lot of attention.

Does anyone know roughly what the weight factor between colorbond and tiles typically is.

Another thing, having cleaned my fair share of gutters, I find colorbond or similar is excellent for the “non gutter” approach. Don’t know if this is allowed in new constructions…probably not…but this works well and avoids the whole downpipes clogging / leaves thing. Just on that…why is it when you check out the downpipe location, it’s always at the highest point of the gutter ??

I’m learning heaps with this thread. Good on everyone for contributing.

Cheers,

Darryl Moore

“No point having a cake if you can’t eat it.”