Hey there,
Great ideas!
A Couple of hurdles though.
Banks /lenders like to see proof of savings prior to lending funds.

Unless you use a non conforming lender…

So the challenge is to find a private lender for deposits) that will sign a gifting declaration – which is hard to do…(although not impossible) unless you have another agreement signed up in the background like a JV for example. – Give them a share of hte projected returns …. share the wealth and you may get something accross the line.
My 2cents worth anyway.
“Money Follows Management”
Best of luck.

Hey there,
Just a suggestion, Get at least 2 independant property managers to go throug the property and get a rental appraisal and also see if there is anything that may allow an increase in rental return.
This will give you an idea of the worst case scenario that your tennant pulls the pin you are not left hanging off the lemon tree!
Cheers
Kiwi

hey there,
A few questions to answer yourself
-Is the house priced below market?
– Are the sellers really motivated?
– How much cash are you putting up for option?
– Why can’t they sell in open market?
– Are you prepared to lose the option fee if you are unable to service the monthly repayments….

remember that you have to create a win/win on both ends of the equation….sometimes we all forget that and the whole deal just turns to “<edited>e”……

You could always assign the option quickly if you have a really good strike price locked in on the option.
If it is not that good a deal… then I would just keep on searching…..
Like steve McKnight and Dave Bradley advocate:
1. How much in
2. For how long
3. What are the risks
4. How much return

Cheers,
Kiwi

1. Try to make sure you buy below market value … or at least at or just below median price of the area….
2. Look at current market and assess your position as to what he market is doing currently (Rising, Flattened or soft).
3. Assess your costs and realisitic realisation of your renovatoins in capital gain?
4. Work out your holding time and how much cash you need to inject into the project before you are likely to get a return.
5. Look at How much cash you will need and whether you can get all the renovations done prior to settling and perhaps even have it remarketed and resold before your loan is actually drwn down. – get an extended settlement with early access to complete renaovation and to market the property agreed to in your contract of sale with the vendor.

Then consider:
– How much Cash in
– How long in for
– For what return
– assess risks
– Compare to other deal you have assessed
– take action – Walk or take the deal!
Just my opinions… take it or leave it … after all its FREE!
Cheers
Kiwi

I just got 2 unconditional last week in NZ ……
Gross yields of
Prop #1 = PP: $79K — Rent $170/week
Yeild = 11.18%

Not enough fat in it for me.
only returning 8% yeild and you will haveto come up with at lest 30-40% of the buy price… I would keep looking and find a more attractive deal…. good spotting though. With commercial delas you could look at returns higher than 17% yeild as you have more of your cash invested in the deal.
Cheers
Kiwi

Hi Thre Elkam,
The IRR is a comparative tool to compare a property against a property and uses a very complex set of calculations.
The considerations to calcualte this are:
– Rates
– Purchase costs
– Renovation costs
– Maintenance
– Repairs
– Vacancy rates
– closing costs
– True market value
– Mortgage Application Fees
– Your income level
– Mortgage structure ( Interest only or P &I)
– Property management fees
– Prevailing taxation rates
– Expected capital gains rates
– expected inflation or rental and expenses.
AS you can imagine this would be an absolute nightmate to work this out on short or long hand…..
But hte good news is that there are programs out there that do all hte work for you once you have the data required.
PIA PRO is one and Dolf De Roos has another progarm call Property Magic I think.

CASH ON CASH Return gives you a good snapshot at the time … however IRR gives you good future and present returns and can outline potential budget blowouts or scenarios such as what if the rent goes down?, what if the interest rates of the mortgage go up etc.
Cheers
Kiwi

Here is a suggestion you could try,
Let it at a lower than market rate say 20-25% lower to compensate for the inconvenience of all the works going on in the back yard…and give them the incentive that if they take care of it you will assist them with moving into another property if the need arises.

Hey there,
Second registered mortgage still does not give any 100% assurances that hte vendor will get thier piece of the pie either… if the market slumps and the property loses sales value to a price below the outstanding debt…and the deal goes pear shaped and hte bank forecloses….. the registered 2nd mortgagee gets the crumbs if any AFTER the 1st registered mortgagee has taken all late fees and legals + the total payout figure.

A caveat give the holder the right to enter a court hearing and delay proceedings untill thier case has been heard… in other words settlement can take place until the caveat has been lifted. – As far as I know….

WE have worked around solicitors detering thier cleints by just offering a copy of our spotless credit report and letting them know how serious we take this and if it did not work out we go totally in the black book of the bad debters….. lose all our houses …. I mean come on lets be realistic hear…. get them comfortable and they can reject thier solicitors advice and still win in the end … as if any of us want to be on today tonight in hte public eye heading the story of the week “Aussie Diggers Scammed out of thier house”…..
If you have a good system and keep a good eye on things you will find things just fall into place.

AS for the 25% baloon payment…. I am not saying it would be impossible … however you need to think of hte vendor and how they would win out of this arrangement…. the more you address thier needs nad find solutions to thier problems… the higher the chance of success. Try not to get to creative first up as it my cause you to stumble and get confused on your own terms thus damaging your credibility as a seasoned investor….
Cheers
Kiwi [baaa]

I agree… the PM could be the issue here…… you may need to look into finding either a better motivated one …. or one that actually knows what they are doing. Ring around other agenst and find out hte average time fram good houses (similar to yours) is currently takeing to rent…. BUT FIRST ask them if they have any on the books, how much per week?… and how long have they been avaliable….

I would call twice…. first as a potential tennant called Scott… then as you the proeprty landlord looking for the right PM.
This wisll allow you to collaborate thier stories to see if theyare talking S@#T or not….. If their stories don’t match…. CONFRONT THEM! Find out why they are trying to pull the wool over your eyes!
Cheers
Kiwi
[baaa]