Forum Replies Created
Battleships,
I think # 2 is excellent if possible…you’ll definitely get the real picture if you can actually get access to them…they could be out the back in a normal office structure – where this won’t work. Unless they are right out the front where you are standing – you wont know.
In regards to # 1 – who exactly are you asking for references ?? Surely not the PM you are trying to assess. You definitely wont get a realistic picture with the PM offering referees – they aren’t exactly going to direct you to one of their many dissatisfied customers, be they LL’s or tenants ?? This won’t work.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Heya Big Al,
I’d be wanting satisfactory answers to the following two questions before going any further with your due diligence process ;
1. What has been the capital gain of the prop, compounded annually over the past 10 years ??
2. What are you expecting the capital gain of the prop, compounded annually over the next 10 years to be ??
What are you hoping to extract out of the purchase, CG, cashflow or both ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Thanks Rob,
Doesn’t matter…any that you felt confident with, after having carried out the usual thorough Due Diligence on the specific property in question.
I’ve found it’s not relevant using sweeping categories like each city – you need to get down in the weeds and get way more specific than that…
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hiya Darren and Kerri,
I think you are significantly exposed at the moment in your current situation w.r.t. choosing a good PM. Having travelled down this road before, my comments are meant to be realistic…not to fluff you up.
I believe this question of locating a “good” PM as opposed to “an also ran, or bottom feeder”, to be identical to asking how one locates ;
1. A good accountant
2. A sympathetic, knowledgable doctor
3. An efficient, reliable mechanic
4. An independent financial adviser
5. A savvy and shrewd solicitorThe extremely difficult portion is once you probe the particular service provider with your blunt question – are you specifically knowledgable enough in that particular discipline…whatever it may be…to actually disect the answer and quickly establish where that service provider should be placed in their industry’s pecking order ??
If you put it on a scale, graphing inside industry knowledge (in this particular case PM’s)…you are currently at about 5% and probably climbing rapidly…the really bad PM is at about 80%…the good one is at 95%. I fail to see how someone at the 5% level could ever possibly determine which one was good and which one was a nightmare. I believe that situation is relevant for selecting all of the above industry practitioners, not just PM’s. Until you gain knowledge and experience in the industry that you asking about…you simply won’t know.
The PM’s that you may interview will have been asked all of these questions and then some…and will have all of the stock standard answers that sound good to potential Landlords ready to go straight off the cuff…or if they don’t, their Principal or triennial cert. holder certainly will.
By the very fact that you are asking “How do I know which one is good ?”…the answer is you won’t…and it will be completely pot luck, despite the blunt questions.
A personal recommendation from a friend / relative may be the only tangible aspect you could rely upon until you have more experience in sorting the “wheat from the chaff”. Of course, the person providing the recommendation may have had an easy run and consider the PM to be ‘nice’ and a good manager, but may never have had to truly test their skills.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
I’d use it as a deposit on a +CF office complex in the CBD.
Luci,
That sounds very typical, and therefore stressful to you as a customer. Your underlying assumption that you are the customer and therefore should be treated with respect and prompt service is fundamentally flawed.
The Banks are primarily looking after their own business as best they can – ultimately for their shareholders. If you are not a shareholder of the Bank – tough, if you are, the harshness comes full circle, but the sum of money usually doesn’t compensate.
With banks, I’ve found their is no such thing as a Win / Win. Their objectives are to ;
1. Reduce their risk to ALARP
2. Increase their revenue to the maximum possible.When you take a mortgage out with them, these two objectives are diametrically opposed to what you should be aiming for, i.e. they expose you to the maximum risk possible and increase your costs of funds to the maximum possible.
Getting back to Rob’s topic – I haven’t used a broker for over 10 years now, and haven’t been into a branch for the past 6.
My Banker is very prompt and attentive, fantastic on the small details on the loans and is able to swing me better rates than what any broker can do.
More importantly, we’ve started to build a good relationship with him, and he’s not aspiring to go anywhere, he’s happy in his current possy – which was a huge concern for us. Previous to this one, we’d had 7 different people assigned to handle our files over the past 4 years…it drove us nuts.
As everyone knows, the most stressful thing with brokers and banks is getting the various people you talk to up to speed with your particular details. Rather than a 2 minute convo, you end up going thru the painful “What’s your name, address and phone no.”
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Another big step forward today…it was forklift day !!! YES [biggrin]
The two tenants are out and the place looks a whole lot better. Locksmith has been and gone and we are now in control finally of our whole property for the first time ever.
The two losers who were occupying the units without paying rent have been turfed out – without involving the lawyers and court circus…and now we simply move on and tenant it out to reputable business people who are prepared to stand by their word (and hopefully can read and write).
Being out of Oz at present, the burden of confrontation fell back to the wife…to which she handled it magnificently !!!
Having done this before, I know this is stressful stuff going toe to toe with losers…I think Bailiffs are underpaid – whatever they make it isn’t enough.
Anyway, a very large step closer to having this IIP ship shape…we are on track with our self imposed deadline to smarten the joint up.
As I posted in this thread earlier, we bought this place knowing full well we’d have these problems…but also realising if we could fix these problems the value of the place would sky rocket. Solutions I’ve found, are way harder to successfully execute than just sit down and think out or plan.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hiya Mabbott,
If I was just starting off, I’d look at the bigger life picture and decide in which country my fiancee and I were going to live in for the rest of our lives ??
The answer to that would decide the smaller question of where and what to invest in initally. Knowing the details of the specific property market you wish to tackle and complex tax regimes absolutely inside out in one country (to be a successful investor) is hard enough when you are just starting out.
Having intimate and up to date knowledge – so you don’t get shafted – of the specific market and tax regimes for multiple countries is simply beyond most people – let alone newbies.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Terry,
That’s very easy to say but I disagree with the advice you have provided.
Involving solicitors certainly won’t solve the problem…I’d say it’d very quickly inflame the situation drastically, and whatever exposure Elodie thinks he / she is up against I’d hazard a guess and say that the exposure to the solicitor would be far greater. The other thing it’ll do is drag out the resolution for a far greater time than needs be.
Elodie…is the mess a complete surprise ?? Did it just all of a sudden appear in the past week or two ?? Or have you known about it for a while and negotiated a decent price for the prop., knowing that the place was a mess ??
By your post, you’ve put yourself in an extremely weak bargaining position by wanting to rent until settlement. The other party is simply exploiting their advantage that you have handed him on a platter.
At the end of the day Elodie, all you want is to own the house and be living there. Talk to your sett. agent, but if you hold up settlement, you won’t lose your deposit, as the sale will go through eventually…but you’ll be holding it up…at your expense, unless it is specifically stated in the contract of sale – not the vendors. This is the exact predicament we were just in last month. What did we do ?? We ignored the vendors..settled, and pro-actively got in there and cleaned the mess up (ours was about 55 tonnes worth). How big a mess are we talking with yours ??
Messy people don’t / won’t clean up mess. Forget them and be proactive…otherwise you’ll pop a vessel stressing over their inaction, and spend a chunk on lawyer fees with no satisfaction.
My short term recommendation – rent a short term place for yourself until it settles, and a storage unit for your extra ‘stuff’. This will give you time at least to get your life together and review your options. It’ll also restore your currently very poor negotiating position back to an even footing against the vendor.
My long term recommendation – don’t go buying “messy” places unless you are prepared to be active and clean it up – messy people don’t clean up their mess – even if they obligated to, it’s called slackness and slothfulness – you won’t change their human characteristics – even with a lawyers threatening letter in your hand….obviously compensate yourself prior to this buy purchasing at a discount. Also, don’t go putting yourself in this predicament in the first place. The vendor can see your weakness and is having a field day given your time squeeze.
At the end of the day, it’s up to you Elodie to sensibly lay out all of your options and choose the path that you wish to take.
What I can guarantee is that taking the “seek independent legal advice” path will definitely not be the shortest and most dollar efficient way of dealing with your current short term problem. It also won’t teach you anything constructive for the long term, but will force you down the US style litiguous farce.
Can you tell I don’t like lawyers ??
Pull on your overalls and gloves and get after it. Best of luck to you.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Gatsby,
I’m picturing the airline mechanics taking the 40 foot ladder away when he’s up the top, leaving him dangling by the said coat hanger…saying “Hey – come on fellas !!”
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
OK, I’m going to have another crack at this ;
Investor : Mr Joe Bloggs
Assets : $ 6 MM
Debts : $ 3.5 MM
Income : $ 300 K (5% avg…some 3% res and some 8% comm)
Interest : $ 245 K
Outgoings : $ 55 KLifestyle : $ 55 K p.a. (I reckon $ 1,000 p.w. is plenty)…god knows what these people do that need $ 2 K p.w. to live on.
OK, so here is Mr Bloggs, mid life, having built up a pretty good portfolio but still has considerable debt (LVR of 58%).
His cashlfow position on his props. is completely nuetral. Rents cover his interest and outgoings. This won’t change over the years.
His only intention is to pull the pin (quit) at his place of work and live off his equity.
He’s pretty conservative, so he’s fixed all his loans in at 7%. He’s also asked his Bank Manager to pull out $ 55 K per annum to live off. Some tax, plus a grand a week to live off.
Here goes;
Starting possy;
Assets $ 6.0 MM
Debts $ 3.5 MM
Equity $ 2.5 MMAfter yr 1 (Cap growth of 8%…a good yr)
Assets $ 6.48 MM
Debts $ 3.555 MM
Equity $ 2.925 MM he’s happy so farAfter yr 2 (Cap growth of 3%…a bad yr)
Assets $ 6.68 MM
Debts $ 3.618 MM
Equity $ 3.062 MM he’s stressing a bitAfter yr 3 (Cap growth of -4%…a shocker of a yr)
Assets $ 6.41 MM
Debts $ 3.685 MM
Equity $ 2.725 MM he’s just about to have a heart attack – but loves the lifestyle.After yr 4 (Cap growth of 13%…a cracker of a yr)
Assets $ 7.24 MM
Debts $ 3.757 MM
Equity $ 3.48 MM he’s over the moon and getting richerI’ll stop there….playing around with the figures helps alot…I also think needing $ 100 K p.a. to live off is complete twaddle and comes close to wrecking the scenario. If you do need that much, you’re either living in the wrong place or your consumption habits are way over the top – IMHO of course.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Devin,
Yep – we just bought a complex with six industrial sheds on it. They aren’t storage sheds as such…more like normal “work out of” sheds, but the business concept is fairly similar. We have kicked out some pretty ordinary ex-tenants, and are now getting quite a few enquiries from people who want to rent them. The majority, surprisingly, just want dry / lock up storage space…which suits us down to the ground and generally tenants who want storage space seem to want it for a rolling time. They say they want it for only 6 months, but that always gets extended.
We are constantly amazed at how much ‘stuff’ people have and need a place to put it all. It’s an expensive exercise to keep, and we are sitting at the end of the line so to speak with our hand out.
The full on storage facility that you seem to be refering to, we steered away from, as doing some research it appeared that most of those types of properties in Perth had offices with a full time person sitting there managing people coming and going…which killed the business idea for us. Of course, we could of hired someone to sit there and do that task, but we felt it introduced another person into the organisation that we didn’t know and trust implicitly…that was too big a step for us…just yet.
I think however the full on storage sheds business has it’s merits..we are seeing some of the overflow at our complex (we have a really big well established storage facility less than 200m away from our block) and it’s OK.
Dollar wise, the sheds are great, we shall eventually be at 16% gross yield, which is slightly better than we can find in houses. Picked them up for land value and are having a ball to tell you the truth. The tenants don’t whinge and carry on like pork chops, unlike their domestic residential counterparts.
The best part of it all, you are no hamstrung by pathetic tenants unions and the dreaded RTA.
Buildings are generally pretty low maintenance – although put up big chuncky bollards, you’ll probably get alot of heavy traffic with trailers etc…and we all know what those bloomin’ women drivers are like….[biggrin]
Good luck with it all.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
I mean no such thing.
You can buy whatever, whenever and wherever you so desire. Knock yourself out.
Best of luck with it all.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Salary from a job I’d say.
Hiya pg2005,
This question pops up like a revolving door every month – I guess this one is the May ’05 edition. The answer is definitely Yes.
Answered very similar question about a month or two months ago with about 9 or 10 detailed examples in this forum, which were all positively geared and all within capital cities.
Once again, if by “property”, which is such a broad term as to be near useless, you mean you’ve looked at an extremely narrow, specific band of “property”, i.e. a few 3×1 houses in main city suburbs under $ 300 K…you’ll need to look way harder than that.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Tomster,
Yep – you can…I posted details of such deals about a month ago…that was nett as well, not gross.
I think your comment was refering to a certain type of property on a certain type of scale.
I’ve found “Property” to be such a wide ranging term, that often poeple generalise too much.
For example, the market for both Capital Gains and rental returns are very different for ;
Student Accommodation
Petrol Stations
4×1 B/T houses in the ‘burbs
Dockyards for sea container laydown
3×2 swanky inner city townhouses
CBD office blocks
5 acre farmlets on the city suburb fringes
Shopping centresAll of these are “Property”, but you’d be foolish to try and lump them into the same pot, or draw any correlation whatsoever.
They all behave very differently indeed.
Perhaps you were only refering to the first on the list…I don’t think it’s reasonable to lump the other sectors in with the very narrow band in which you are specifically looking at, and then conclude “I don’t think you could find an 11% return in Melbourne!”
I bet you could find 11% if you looked hard enough and had the resources to actually do something about it.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Heya cmhall,
Well done for plucking up the courage to write a post…not too scary is it ?? [biggrin]
Besides the bog standard referral to “consult an independent qualified professional adviser” – how does a layman sort the wheat from the chaff with those ??…..I’d definitely hang on to the Sydney prop, regardless of the yr it was purchased. Your loan is only 21% of the value of the house. Well done.
Also, the loan payments would be around $ 19 K p.a., with say a further 7 or 8 K p.a. for C.R. / W.R. / LT / PM fees / Insurance etc…..so you’d only need $ 520 p.w. to fully cover the expenses of the prop. I’m assuming a place in Sydney worth 1.3 MM would rent for more than $ 520 p.w. ??
With your limited cashflow – ain’t we all in that boat ?? – do you really need to get into the Qld prop. market as well ?? Why not diversify into other asset classes and let you prop. holdings continue to tick along.
By the sounds of it you are well and truly along the wealth road already – alot of people have been scratching up the food chain for years and aren’t up in the dizzy heights of where you are right now.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hmmm,
I think 50% appreciation over 10 years is about 4.13% p.a. compounded….not 5%.
PT16829 ;
Instead of simply punching numbers into an online calculator that you don’t understand the workings of, why not start with pen / paper and calculator, then progress to your own simple spreadsheet, enter the formulae yourself and then rev it up later when you gather more knowledge.
That way, you fully understand where the numbers are derived from, instead of punching numbers into a ‘black box’, and being confused when the answers are not what you expected.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
It’s alot easier when it’s your PPOR.
Very difficult if it’s rented out.
A nice looking sign out the front with just one number is much more powerful than ads in the paper – local buyers only to start with, but word of mouth spreads like wild fire.
Don’t have home opens….you are only looking for one really high priced buyer – not 60 sticky beaks who want to trapse thru.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Rob,
Perhaps the people who are successfully using this strategy, and by default whose comments should carry the most weight, are so loaded and so casual and so happy with life they have no desire to explain it.
I’d also suspect that with enough equity to make this strategy really zing, most of the folks would be fairly senior in years. This in turn might preclude them from jumping on this medium – through fear / unfamiliarity / or plain don’t want to talk about it…different eras – and telling you exactly how it works…
Who knows – maybe Pickworth could add his opinion to the matter ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
