Forum Replies Created
Resiwealth,
I’ve heard and read about that purchasing tip many times before – but unsure if it has ever been successful.
If a place is listed for $ 130 K and the Buyer reckons it has $ 15 K worth of defects, the typical conversation goes something like ;
Buyer : “I think it’s worth only $ 115 based on all these defects.”
Seller : “We agree completely with your list. If the property didn’t have those defects we’d be asking $ 145 K….now are you interested or not ??”At this point the Buyer either walks or screws up the list and gets back to serious negotiations.
That’s been my experience anyway – both standing in the Buyer’s and Seller’s shoes.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Is Admin going to step in ??
Chaps,
Why don’t you two sit down together and discuss your differences over a beer.
You could both have a laugh, present your opinions to one another privately, over the course of about 20 minutes and then shake hands and agree to disagree if that’s where it ended ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
G7,
You’ve been in this game a while now I imagine.
This is all about control, and the PM establishing her control over you as the incoming tenant. Establishing the pecking order if you will.
Them sending you a report they’ve compiled, for you to simply agree and sign – they are on top. With you going through the report with a fine tooth comb and making multiple changes, completely upsets the pecking order she is trying to establish.
They are coming out there again to not re-inspect and write another report, but to re-establish their dominance over you – it has nothing to do with the little nicks and bumps that you are actually discussing, although that’s what it would seem to be on the surface to a casual 3rd party.
I bet they also send out their most junior assistant – such that you have to go through it with them…and if you have any difficulties – you’ll have to approach the big bad nasty PM as a last resort…standard negotiating tactics to get you under control and in your rightful place…at the bottom of the heap.
I’ve found in the past – deal with the “head duck” direct – works wonders as your agreement with them filters or cascades down the organisation unopposed.
Agreed – or complete and utter psycho babble ???
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hi Borg,
I used to find that in the past discussing investments – whatever they be – but mainly properties, especially with people my age. They were continually wrapped up in their PPOR and had no other comment re: IP’s as they generally didn’t have any. Concentrating too hard decorating with ‘nice’ things and redoing the backyard for the kids.
I found a pleasant surprise talking with elderly folk (everyone 40+ [biggrin]), and tapped into a very rich vein of experience indeed.
We now mostly don’t discuss investing with people our own age, and instead initiate many a good time, with plenty of intricate local knowledge coming forth. Some of the conversations are a bit vague, as the memories sometimes fade, but the ones with a clear memory are absolutely fantastic.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Redwing,
Happy to share some of the VGO data I purchased. These two, both in WA, are not residential and therefore probably not of any interest to most people – but it caught my eye ;
Both are for 4,000 sqm industrial blocks (bare land values only)
1. Welshpool
1976 – $ 4.80 / sqm
2004 – $ 100.00 / sqm
Compound CG rate of 11.45 % p.a.2. Ozzy Park
1976 – $ 10.00 / sqm
2004 – $ 300.00 / sqm
Compound CG rate of 12.91 % p.a.It’s a bit scary to think what it’ll be in another 28 years…even with inflation taken into account.
This was enough for me to jump in boots and all. I found the CG rates to be above most – not all – ressy suburbs – but the best bit was you received the growth whilst the ind. tenants paid outrageously high rents to you, plus all of your outgoings and insurances…so you received it for free.
I’m sure there are better CG rates out there than what I’ve jumped on, just wonder what time frame they are over…I was happy with the 28 yr time frame as it took in alot of ‘ups and downs’.
P.S. Happy now for everyone else to jump in and push the value up….[biggrin]
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Damo,
Just addressing this issue of CGT with your PPOR, I believe Noel Whittaker addressed this issue about 10 or 12 years ago in his second book “More Money”.
His suggestion, based on the ATO taking a dim view and classifying the property renovator as a ‘trader’, and therefore liable for CGT, instead of just a place to rest their head at night…was to alternate the ownership of the prop. between yourself and your partner (assuming you have one of course).
His reasoning was that it would take on average 12 months for acquisition / reno / prepare for sale / advertise / closing the sale / realising the funds after settlement, and therefore by alternating you personally would only be selling one prop every 2 years…something that the ATO couldn’t reasonably term as ‘trading’, and therefore exempt yourself from the CGT liability.
I thought Noel’s point of view was very reasonable and he’d pretty much confirmed that with his contacts in the ATO.
On another point, it’s pretty spooky the amount of property investors replying to this thread who are living in Perth and are 35 years of age…there’s a few of us around hey !!!
Maybe we should get together sometime and have a casual chinwag ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Rob,
Having read your very long spiel tearing Michael’s thread to pieces, I’ve got to say I totally disagree with you, and agree fully with what Michael has put forth.
This might upset you as well, but despite my opposition to the IC club – which you know about – many of the senior IC members also use this strategy to good effect – big Kev calls it “harvesting equity”.
The numbers do add up correctly if big enough…trust me [biggrin] (Never trust a man who says ‘trust me’)
Enough, I’m buggin’ out of this thread.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hi Rosepink,
A cottage and two halls…obviously your options shall be limited to what the zoning of the block/s are.
Do you know what it is ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
That’s a bit forward of you Marisa….
Happy to keep the posts vague and non-interesting if that’s what forumites really want…but I believe vague one liners don’t add much value – this is a numbers game after all ??
Picked up one big block ‘the problem child’ in Welshpool 2 months ago now and the +CF big one in Ozzy Park a fortnight ago.
Our cupboard is now bare…so happy hunting !!! It’s fertile ground.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hi bacchu,
Yes, received our valuation on the Industrial block we just purchased less than 2 weeks ago now.
Bank organised the valuation (I grilled my Banker and asked him what his verbal instructions to the valuer was – he said ‘no preconceived ideas’) and lo and behold the valuation came back $ 140 K higher than the purchase price.
Previous to the valuation, I sat down with the Banker and showed him the VGO data I’d purchased for $ 375 for all Perth metro industrial areas. The final valuation figure was within 0.4% of our VGO bare land data. (I then mentioned it was a waste of money carrying out these outrageously expensive valuations – more than $ 6 K ).
Both the Bank and our group were very happy. The Vendor had the place on the market for over 10 months and just wanted to flog it off – despite it being +CF.
Valuation was only $ 10 K above his asking price – so we knew we got a bargain.
Anyway, it does happen, but my Banker said it was rare.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hi Kenyaboy,
Why not sit down and calculate what your holding costs would be. If it is economic, discount your offer to the Vendor by this amount and offer them a really short and therefore attractive settlement period.
That way, you spend the same amount of money as you did previously but gain the surety of owning the place, and therefore remove the risk of which you ask about, altogether.
How much value do you place on this risk ?? Your offer may be structured accordingly – therefore eliminating the need to consultant a solicitor as you shall hold legal title over the property.
EG : Asking price $ 250 K
Offer 1 : $ 250 K with a 6 month sett period.
Offer 2 : $ 241 K with a 1 month sett period.Both are pretty much the same time / dollar value, but the second offer has removed the risk that you speak of. You don’t need permission from anyone after sett. and no-one can ‘steal your rejuvenation’.
Whaddayareckon ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Thanks Rob,
Not sure about your first statement…it was the thrust of my question…most of the situations are covered and governed by the in place lease I thought. I’ve certainly never read on any comm. lease that the tenant has the right to strip the premises bare – in fact I’ve read quite a few where it says any improvements made to the premises are to be left as is for the benefit of the Lessor at the expiration of the lease term.
My difficulty is they are all on a wink and a nod verbal – nothing agreed in writing….one has to be literate to get to that state.
Obviously if written leases are in place, rent increases are agreed upfront – there is no room for argument on eiher side – unless it’s “at market”.
Interesting to hear the other side from the tenant’s perspective. I guess arguments prevail as both sides try and squeeze the best deal for themselves, and literally they are diametrically opposed. In most cases I’ve seen, this Win / Win situation rarely pops up…hard to achieve when the tenant constantly says he wants rock bottom rent regardless of any ‘sweeteners’.
Good chatting with you anyway.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Mitm,
We have owned a beach shack for the past 4 years. Having a young family we bought the place as a ‘fun place’, with the intention of getting away from the city mainly on weekends and the like.
Finances and investing came a very poor second or third in the heirachy that went into the selection criteria before the decision to buy was made.
The beach shack has fulfilled it’s primary function of having fun.
We have been pleasantly surprised by it’s financial performance…coming from our low expectations, we are reasonably happy with how it has performed.
The rental income covers 86% of the mortgage payments (started out as 100% loan) – we chip in the other 14% plus all outgoings.
Over the 4 years we’ve had to chip in a total of $ 19 K, but the up side is we’ve had free accomodation for holidays for the past 4 years and enjoyed cap growth of $ 185K so far. We consider it paid fun !!
What are the downsides ??
1. PM (only IP we employ one for) charges 20% plus all the usual add ons.
2. Some minor kitchen utensils and crockery always go walkabout – frustrating mainly – $ cost about $ 120 over the 4 years. Don’t let that put you off though.
3. We usually go in the off season, as it’s always booked out over Easter / school hols / Xmas and New Year
4. Even though the casual tenants bring their own linen, the thought of many couples going through your bed is a tad off putting. This in fact is the main reason why other people in the town don’t rent theirs out. When we get a bit more flush with cash, we’ll pay the loan off and do the same probably.
5. That’s about it really.We have a big land component to the shack (2 storey fibro right up on the top of the hill with 180° ocean views), so the block is growing nicely.
If you are asking about some villa or high rise deal…I’d probably give that a miss.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Bit of progress with the ‘problem child’ we purchased two months ago now.
Letters of abandonment have gone up on the 2 units the recalcitrant tenants occupy who’ve refused to pay rent from day 1.
They are having a meeting with the forklift and dump truck next Monday.
We have 2 or 3 tenants lined up ready to go in there, paying 40% more than what these guys were supposed to pay by didn’t….so we had a bit of a win there.
The fourth unit is occupied by a fibreglass chap, who didn’t want to stay under our conditions of a written lease, but is currently paying our increased rent (jumped his from $ 1500 p.c.m. up to $ 2,500 p.c.m.).
The back two most valuable units with the half acre of laydown area that a 40′ semi can turn around in are still unlet at this stage, but we are already extracting more rental from the place than the previous owners and the level of tenants has improved dramatically.
I reckon we are about 40% of the way there with the place now….inching forward slowly…once we have them all wrapped up on 3 yr leases we can sit back and enjoy the 16% gross yield.
Legally we are probably not doing the right thing by forceably kicking out these clowns who won’t pay, but following the legal process, which is pretty vague to me, is frankly complete bollocks.
I fail to see why I should extend the rights they deserve as they are not upholding any of their responsibilities…
Anyway…
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
This sounds very similar to a story in one of Jan Somers books – think it was the 101 story one – where one of the elder gentlemen had bought up about 30 props and was travelling really nicely.
In 1970 (I think he was 40 then) he decided to sell the lot and cash in his chips – think he cleared $ 300K, and subsequently lived like a king. Over the years, the twin ravages of inflation and taxation ate away at his savings to the point that he was as poor as a church mouse.
When he looked back on what he’d sold, it was worth something like $ 4 MM back in the mid 90’s and was producing over $ 200 K p.a. in rent.
I learnt alot when I read that story and whenever I hear about “cashing in your chips and living like a king” I think of that story.
I for one don’t need to experience that “pothole” in the road to wealth – reading about it is enough for me.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Mmmm,
Feelings…isn’t that a wonderful word.
“The tenant might feel that the Landlord is all take and no give”.
What, with Council Rates / Water Rates / Land Tax / Insurance / PM fees plus add ons / Maintenance costs at the whim of the tenant plus all else being ripped out of the Residential Landlord’s pocket before the mortgage payment, plus supplying the roof over the tenants head without fail every day – no excuses there…
I think it’s a bit rich when the tenant wishes to screw the RLL down as much as possible and then on occassions decides that, despite what is writtne in the lease and signed off by both parties, paying the rent is optional.
No – in most instances the RLL gives far more than the tenant. But then, as most tenants say – “I don’t give a stuff what the Landlord thinks or has to put up with, I’m only interested in getting this place for as cheap as possible.”
All of this tip toeing around the tenant and scheming ways to not offend them – I don’t see the “feelings” reciprocated.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hey,
East Africa’s gotta be better than West NZ, or southern PNG.
I remember a guy in Sid-a-knee asking me where I was from…I replied the West…in a deadpan serious face he he said he’d never been all the way out to Broken Hill..and meant it…not as bad as some of the hicks from Louisiana, but right up there.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
I agree with Terry. I’m not doing it just yet, but I know people who are, and apparently it’s a fantastic life.
The key to it all is big numbers.
Rob – you need to pop a zero or two onto the end of your thinking and all of your issues will disappear with this concept.
For example;
Port. of say $ 10 MM.
Conservative rise of say 5%….better years are obviously much better – think of them as a bonus to bank for the not so good years if you are feeling squeamish.
Asset rises by 500K p.a.Living expenses 100K p.a. Tax of 7, nett 93.
Your equity is growing by 400K p.a.
I’ve found your personal living expenses do not go up commensurately with the expenses and income of the big port. and…more importantly…the growth of your port., and hence that %age differential is where the happy days and low stresses of the wealthy are funded from.
Clear as mud ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Wylie,
You are correct..we are having trouble with 2 or 3 feral tenants…however these were inherited as a group of 6 which all came with the purchase of the property. We fully expected to have trouble with some of them and went into the deal with our eyes wide open.
As posted before, they were all on a bit of a casual, verbal, wink and a nod – with not a jot of paper in sight and left to run feral from the previous owners…who were on site and probably the most feral of the lot.
Anyway, we are in the process of signing up the ones who want to ‘stay and play the game’ on a 3 yr structured written formal and signed off lease with escalation clauses and 2 x 1 yr options. We have 2 in the bag after 3 weeks and working on the others. The others who don’t want to ‘play the game’ are having a meeting with the forklift very soon.
When picking up large tracts of land with older type industrial sheds for less than land value – one has to expect some work to get the place ship shape and fully tenanted on legally binding secure long leases. We could of bought much nicer properties with signed up leases…much less hassle and headache, but the initial low buy is where we wanted to make the money.
It’s taken us 3 weeks to get this far and we reckon by 5 months we’ll have the lot sorted – with a commensurate rise in the value of the property of $ 0.4 to 0.5 MM…I can handle a few hassles for that.
In terms of “leasability”, with our big professional looking For Lease board out the front, which cost us $ 220 to rent for 6 months, we have been receiving a steady flow of enquiries…these tradesman and truckies always need an area to put all of their ‘stuff’…for some reason they have so much of it. Great I reckon.
Don’t be scared of non-res props…have a really good look…even though you aren’t comfortable with them now, it may be worth the pain to get up to speed with them…how big is your comfort zone and do you want to expand it ??
This prop is definitely in the realm of Steve’s “find a problem and then find a solution”.
Good luck with your RIPs and managing them yourselves…we do the same and find it pretty cruisy.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
