Forum Replies Created
If you are talking residential – and I think you are – then when prospective tenants even get a whiff of this proposal they’ll jump all over it.
However, unfortunately for you as a ressy LL, they shall also want absolutely rock bottom rent and you’ll have to fork out all of the outgoings and maintenance costs.
Include utilities in the rent – forget it – if you try and squeeze up the rent a whisker to cover the costs, the tenants will run for the hills.
As long as money in your pocket as LL is the lowest priority, this may have merit. However, most LL’s have this objective somewhere up the top of the priority list.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
So now that you have been made aware of this fascinating information – what do you intend on doing with it ?? And how specifically does it integrate with the tiny portions of real estate that you actually own ??
I’d really be interested in your answer as I personally don’t see any connection. How does it affect your current or next specific deal ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Sitting in an airport lounge waiting for a flight back to Oz, so I’ll kill some time by detailing our first non-residential IP.
Like most people, we were having trouble finding +CF deals scurrying and fossiking (sp ??) around the residential stock. We were also pretty fed up with the constant whinging at the drop of a hat of our tenants over very minor details that took both time and money to rectify…to their satisfaction.
The penny eventually dropped that perhaps we were fossiking in the wrong chestnut pile, and our efforts may have be rewarded more by trying something new. We remembered receiving a “tip” from my wife’s uncle, who was heavily into CIP’s. His only brief comment was ‘Once you’ve finished mucking around with houses – have a look at commercial’.
We didn’t really think much of it at the time and dismissed it as ‘something somebody else does’, we’ll stick to what we know and feel comfortable with.
It took about 18 months of inaction before a combination of whinging tenants / massive negative cashflows from the RIP’s and that irking little voice of my wife’s uncle in my ear that finally pushed us over the edge and out of our ‘comfort zone’ – what a scary place that is – but so exhilirating.
We furiously starting researching deals that were +CF, but really we didn’t know where to start. These were some of the things we found ;
The financing was completely different
It was more expensive
The bank wouldn’t lend as much against it
The agents were different
Everything that was a negative feature in RIP’s was suddenly a sought after feature that you paid more for
Different terminology (NLA, nett rent, Lessor, 90 day bank bills etc)We were literally floundering as most of our techniques for RIP acquisitions didn’t work.
Despite all of the ‘Oh my gawd’s’, and ‘I don’t feel comfortable’ moments, we forged ahead regardless, expanding our comfort zone and narrowing our search down.
We eventually decided to have a crack at a place that unbeknowst to us, had been up for auction about 4 months previously and been passed in. We innocently rocked up and found the agent talking a different language. We were both trying to seem non-chalant as if this was perfectly normal, but he instantly cottoned on that we were newbies at this (the three little girls hovering around our knees sort of gave it away too).
The biggest thing that made us uncomfortable was that the vendor was one of Perth’s biggest developers…a real sharp cookie who always made buku money off his deals…we were on the other end so we knew we were the patsies being bled. It also had bugger all land component, which we knew was important for future CG, but we just wanted to forge ahead and get the first deal under the belt and cop all the lessons in one hit.
On the positive side, we were encouraged with the 10 year lease, which read like a dream. Coming from a residential background, we couldn’t believe tenants would actually agree to all of the onerous conditions placed upon them…and they had to fork out for absolutely everything. The developer had distilled down and cherry picked the best of all the leases he had ever come across in 30 years of investing into this one document. We saw a term that has remained with us ever since “At the Lessee’s sole cost and responsibility to the Lessor’s satisfaction.” What a fantastic term and what a breathe of fresh air compared with RIP’s.
We decided to go ahead and the deal looked something like this ;
Capital
1. Purchase Price $ 1.350 MM
2. Acquistion Costs $ 0.08 MM (95% of this was stamp duty on title)
3. Loan Amount $ 1.430 MM
4. Bank Valuation $ 1.350 MM
5. Land value – bugger allIncome
1. Nett rent of $ 120 K p.a. & GST (escalating $ 5 K p.a.)
2. Outgoings of $ 15 K p.a. (kindly paid by the tenants)
3. Gross effective rent of $ 135 K p.a.We were nearly duped on the deposit for this. The vendor’s agent wanted $ 30K. Upon offering $ 5K, he said it would have to be $ 30K, such that if we had any problems – the vendor could hire a top flight lawyer and sue us with our money…that didn’t go down too well…and we had to muster all our experience from previous deals to fend that one off. In the end he backed off with his ridiculous insistence.
There was some issues at settlement that were resolved eventually. They mainly centred around the tenant not getting on with the vendor. Once we took over, all problems seemed to disappear…I still find it amazing how a change of personality and “feelings” massively affects straight forward business transactions. I guess we are all humans who enjoy being treated with dignity.
It doesn’t set the world on fire by any stretch, but we cut our teeth on it, and it provided much learning in terms of setting us down a new path. We vowed never to go back to RIP’s after the purchase, and that philosophy has served us well.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Heya HJ72,
Well…what a ingenious little ploy. I’m sure the forum hasn’t come across this little tactic before.
What does your raw or gut instinct tell you ?? I suppose if you were happy with this little scenario you wouldn’t be asking the question in the first place.
How would you like to be on the end of that deal ?? Would you be happy or not ??
I know it’s supposed to be caveat emptor and all of that…and the proper due diligence is supposed to weed out little soiree’s like this, but there would be many people who would most likely fall for something such as you suggest.
Hell, I’d go the whole hog and sign up a lease for $1,000 /wk with the associated flick back…works wonders in Indonesia…and see what type of suckers you can pull in with the little stunt. Just watch out for the big bad Karma monster lurking just around the corner – he might just come and bite you in the bum big time.
I’m sure I read somewhere that most successful people approach business with honesty and integrity. Do you think this fits in snugly with that broad definition ??
The saying was not meant to be “Do unto others and then run”…
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
My wife reckons to be reasonably successful you need to have a steely determination and be slightly compulsive and obsessive.
I sort of agree with her – depending on your definition of ‘reasonably successful’ of course.
Paying off your PPOR and retiring happy on the pension was the old definition….I think most of society has moved on since then and would now consider that not too successful. Having said that, I’ve lived in suburbs where even that modest goal (in todays terms) is so far out of reach and not even on the radar…to be laughable – what’s a goal right ??
What motivates me the most ?? Well, seeing as though ‘the game’, if played at a reasonably high level, is a bit of a long haul time wise – it’s the satisfaction knowing that you are breaking new ground within your immediate sphere of influence…that is, no-one you personally know is doing what you are doing, or doing it at the same level…and because of that…people come to you for advice. That is very humbling when approached by a far senior member of your family or close associate.
I reckon it’s the elevated plateau that you should be shooting for, rather than the infrequent dizzy peaks to keep you motivated for the long haul.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
What’s $ 135 x 500….tick tock tick tock times up…
Half of 135 K…easy peasy.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
This has never been tried before, but I was thinking something along the lines of ;
1. Start up my own website
2. Conduct seminars
3. Cross promote my books on said website
4. Further cross promote other products
5. Flog off manufacturing rights to the “Dazzling doll”
6. Intellectually patent the word ‘property’.
7. Buy cake and eat it with the avalanche of proceedsDo you reckon it could be a goer ?? Do you want to be my silent financial backer ?? [biggrin]
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Simon,
Not boring at all. I learnt two new things from your post, thanks.
Wow Hotrod – your yields are thru the roof – good luck with that.
Agreed Mark, most people look like they like absorbing the info, but aren’t prepared to contribute much, which is circular ‘cos they can only absorb what people write ?? Surely everyone has something to contribute, even if they don’t have any IP’s as yet. We all have been exposed to residential housing for many years – with probably many stories to tell.
Jules, most of have -ve CF properties – that doesn’t mean we aren’t interested…always something to learn. have a crack at it.
Gatsby, blew me away. That must of been difficult to write for you at this time. I feel for you pal. Chin up. Thanks for the PM.
Kay – c’mon mate…you can do better than that…
Thanks for responding guys, I’m having fun reading your stories. Might even go thru the 9th one if I find some time…it was scary for us.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
If it’s CF=ve, I normally word it like this ;
1. Finance clause 20 days after acceptance of offer (consult with your lender such that it’s comfortable for them)
2. Settlement 30 days after finance clause removed. (consult with your sett.agent such that it’s comfortable for them)If it’s an investment and CF-ve, why not string it out as long as you can…as long as you are sure you can’t get it substantially cheaper with a short sett. period.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Great post Padmaa. Good luck with the students.
Surely people have interesting and educational stories about property purchases that they wish to share…good and bad ones.
How about one post each from Kay / Simon / Rob / Pickworth / Gatsby / Phil / Woodsman / Pelican / Minimogul and a few Sandgropers like Marisa and Redwing ??
Two out of the whole forum…surely we can do better than that. Or better still, how about some of the ‘silent readers’…maybe now is your chance to garner the courage up to post a rip snortner of a yarn. [biggrin]
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
The three little pigs fable was told for a reason.
Wow Grreg, you seem to have elicited quite a bit of support. Rest assured – there won’t be any forthcoming from my side.
I believe there are two sides to every story, and being a Landlord myself, naturally I lean towards that side. I’d really be interested in hearing their side of the story. That will never happen of course.
Perhaps there are aspects to this situation you haven’t fully detailed. My first question is why are you on a month to month lease ? Is that what the Landlord wants – it’s certainly not what would be attractive to me. Perhaps he’s asked you to sign a long term lease for his stability and asset value and you have refused….perhaps.
Perhaps you haven’t been diligent in your rent payments, perhaps you aren’t looking after the place to his /her expectation…who knows – only you, the agent & the Landlord really know what is going on.
Perhaps s/he has tried to contact you 10 times by phone and you have refused to respond – this is very common with alot of tenants. Who knows – perhaps.
In direct answering to your questions, I wouldn’t ask for anything. And I wouldn’t “push it” at all. What do I think is reasonable compensation ?? How about living in a much nicer / cleaner / newer place for starters.
Howsa about lock in a long term lease with the Landlord, then put up with the slight inconvenience for a few weeks knowing that the “compensation” is living long term in a better place that you know you like the location of.
Bloomin’ whinging prima donna residential tenants, thank god we are scaling back having to deal with trumped up little lawyer wannabes.
Everyone who advised running to tribunals and “checking their rights” needs to have a good hard look at themselves. Talk about act like Americans. The LL is trying to improve the place for the tenant for goodness sake. Why not be pro-active and help out to get the improvements done quicker.
Instead of adversarially calling the PM and asking “what’s in it for me” – because you aren’t going to get all the answers you require off them anyway, why not be mature about the situation, and ask about having a meeting on site with the actual Landlord and reasonably talk through exactly what is going to be done, and at the same time offer to sign a long term lease. Now there’s a win / win.
You are currently heading down a lose / lose path.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Jodie,
Redwing started a good thread on tips for selling privately.
Perhaps with your experience you could share a few of your detailed experiences for the forum.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hey Mike,
Other than the “I think” clarification, why do you recommend Jodie look at agent only sites when she clearly wishes to sell privately ??
Unless of course Jodie is a fully paid up affiliated agent member…
The sites you’ve recommended are great for scanning if you wish to buy, but she’s selling ??
I’m confused.
Hi Jodie,
Why restrict yourself to just websites ??
I know quite a few of the boys up in Karratha, most are loaded and pretty savvy when it comes to a dollar.
Why not spread the word, or post up on local notice boards. Not everything in life is solved by the web or needs to be online to get the best sale price.
My first port of call would be the neighbours – they have a strategic reason to offer you top dollar for your adjoining prop.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Mark,
I’m not sure diluting profits is the right thinking. You’re gaining access to a concentrated income stream from an expensive property that you alone cannot afford to control, and then diluting it amongst the owners on a pre-determined and agreed equitable basis.
Pretty basic stuff…most of the business world works like this.
In my surfing travels I remember a lovely little 11 storey property in the heart of Melbourne CBD on it’s own block of land – fully tenanted on long leases. The asking price was 69, but the rent was 9 per year (13% nett on full asking price), with generous escalation clauses in the years to follow.
In my opinion, a far better way than trying to accumulate 690 poxy $ 100K ressy houses or flats. Rents better too…and you don’t have an army of tenants or PM’s – what a nightmare.
At the time I thought, oh to be big enough to grab that. A signed up / cashed up trust would of been ideal to snaffle that up. Trust…now there’s an overused term, both the legal structural level and on the far more important human side of investing.
Talk about your +CF Melbourne props…there are lots of tasty cookies if you’re looking in the right cookie jar, and you have a ladder to get up to the top shelf. Yum yum.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
I’d suggest sticking to analysing individual deals, and making detailed decisions based on the individual property’s data.
You simply cannot purchase what the papers are talking about. It doesn’t exist.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
1. Neither – are you going to limit yourself to just those two small categories ??
2. Sit down with all your available fin. #’s and go through the exercise with pen and paper. It’ll be good for you.Things needed to be considered include ;
Level of knowledge
Property types available
Funds you have available
Marginal rate of tax
Risk profile
Debt servicability
and a myriad other thingsIt really is daunting just starting out…hard to know what to tackle first. Maybe try something really small, or if completely lost, let one of the “investment groups†hold your hand for the first one of two. You’ll get ripped off a bit to start with, but it may be a quick way of practically learning what you need to know.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
It may be harsh, but I think if you pass the 3 below criteria;
Not in jail
Over 18
Not legally insaneThen you are big enough and ugly enough to look after yourself. No-one is forcing anyone to go to these seminars, or indeed stay once they are there and no-one is forcing you to hand over money to anyone.
At some point in time, one has to stand up and be responsible for one’s actions.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Gatsby,
Whoa – that’s ringing a very distant bell – Life of Brian or something ?? You seem to have the same warped take on things.
