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I invest in a partnership with a friend and now business partner. So far we have bought 5 properties ranging from a small development site, some reno/flips and 1 wrap. In buying these properties we put out about 20 offers in total over about a 6 month period.
Since we are just starting out, we are taking things slow in order to build up to a full time business. Our discounts have usually been between 0% and 10% as these deals were right on the money and would not last long. In one instance we have bought for approx 20% discount as this came on good advice from our agent.
All reno deals have so far returned over 100% ROI and our wrap deal has achieved a 70% cash on cash return.
Cheers,
Mathew.
Hi Insider,
I think you misunderstood my post.
Let me clarify things by saying that I work very closely with 5 or 6 agents in the areas that I currently invest. I get excellent feedback from them on vendors situations and we work together to put good offers on properties that they feel have the greater chance of being accepted.
If they know a vendor that has listed above FMV but that are confident that a lower offer will be considered, then I make a lower offer. I just don’t go shooting off low ball offers at every property I see as I feel it simply wastes time and upsets agents.
I’m sorry if you feel I am restricting myself, however I do still have a fulltime job, a daughetr to look after, a business to run as well as building my property investments. This is why I spend my time putting together offers on properties that I feel have better than a 1 in 40 chance of acceptance.
Cheers,
Mathew.
Hi Sooshie,
That does sound like an interesting game, i might see if I can find it somewhere.
Mathew.
This actually is quite a good topic. Most of us have played monopoly at some stage, but it would be interesting to know what other business or investing games people have played.
I have played cashflow 101 a few times and liked it but thats about it. Sooshie what is the game pay day that you mentioned? How does it work and is it good to play?
Has anyone played any other games that would be worth discussing?
Cheers,
Mathew.
There are more ways to get a good deal than trying to low ball. If you have done your research on the area and spoken to enough agents, you should know what the approximate FMV of a property is to within about 10K.
If the property is around that price or under, then to me a low ball offer is not warranted especially if it is under. I would be more concerned about getting the settlement terms that I want rather than try to haggle for an unecessary discount.
If on the other hand the property was way overpriced, say 30 or 40k, then it would generally fall out of my personal criteria and I move on to one that is a lot more realistic. Unless there was a redevelopment opportunity or something that justified a higher price.
I don’t have any hard and fast rules like I must offer X% of askiing price etc. and I take each property on its merits. I do know that I have better things to do with my time than spend hours preparing and faxing 40 or 50 offers a week with the expectation of getting 1 or 2 accepted which is where I agree with Steve’s strategy.
I do like what Oscar said about making 2 or 3 different offers for price and terms on a particular property that I was interested in as it does give you more options to work with.
Cheers,
Mathew.
Hi Poochi,
Have you tried to refinance your home or have you tried to get a new loan using your home as equity?
An option for you might be to refinance your home and use the money to become a money partner for an investor.
There would be lots of investors out there (like me) who would be happy to pay you interest on your money or share profits with you for future projects.
Cash rich investors often use this method to gain some cashflow or part ownership of properties.
This is just an idea for you and you need to consider your own personal situation before making any decisions. However I would be happy to discuss possibilities with you should you want to look at this option.
Cheers,
Matt.
Oscar,
What type of offers are you making and what is your expectancy rate of them being accepted?
Cheers,
Mathew.
Hi Russell,
Your post is slightly limited in information to help you with your costings and profits.
Do you actually own the land or is it mortgaged? If it is mortgaged you will need to take into account the amount owing on the property in your calculations.
You don’t say much in regards to your other costs such as D/A, architect, legals or selling costs etc. so I have to assume that you have those covered.
I have to agree with Steve to say that your profit seems a little thin. Margins are generally reffered to as a % and not a $ amount, so if you calculate a profit of $300000 (gross or net?) then based on the construction costs you mention it works out at about 20% margin.
Most developers that I know look to achieve a minimum of 30% for a deal containing this amount of units. This may vary depending on demand and availabilty of units in the chosen area, but is a general guide.
Some more figures would certainly help to provide you with more information.
Cheers,
Mathew.
APIM,
Your last post helps me to see your point of view, and I appologise if it came across that I was attacking you…..I wasn’t.
I too agree with Steve’s idea of helping people, and part of my income goes to charity to do just that.
When investing in property buy wraps, L/O or buy/hold I know I am helping people to either buy their own home or make a home for their family.
But my main personal reason for investing in property is to help 2 other people……my wife and daughter.
I want to provide the very best life for them and for future generations. For this reason, I look at the numbers in a deal more so than who I may be helping…if that makes sense.
Mathew.
APIM,
If I can just dissect this post for a moment, I will address a couple of issues that stand out to me.
quote:
1) I could never agree with such practices, and feel no sorrow for the workers. They stay on the job because of drugs and fear. They COULD find a better job if they really wanted to. Most of the time they are exploited and treated like animals. Once they start it is very hard for them to get out.
While I don’t critsize your moral issue with this, I do find it disturbing that you can say you feel no sorrow for the workers. While some choose this lifestyle, others feel they have to do it out of fear or survival. I do feel sorry for the ones that feel they have no other options in life, but thats just my caring nature I guess.
quote:
2) Who do you think go to these places? Not only the single but married men as well. A lot of broken marriages and broken hearts because of this.
I think you will find that if the statistics are analysed, far more marriages are broken by people having an affair than by someone going to a prostitute.
quote:
By renting a place like this you would be implicitly agreeing with what is going on and would have to be held responsible for some of the consecequences.
By this reckoning, if I owned a pub that sold alcohol, cigarettes and had a TAB, I should be held responsible for some of the consequences of alcohol, nicotine and gambling addiction. Oh and also for the affairs that begin by the married people meeting in my pub.
I hardly think so.
I don’t attack your moral issues as we all have these, but going back to the original idea of investing (I believe that’s what we are here for) I am here to aquire wealth and positive cashflow and if renting a house to a brothel would help me achieve this goal, I would do it.
Cheers,
Mathew.
I agree with Sooshie on this one. I don’t believe a brothel is unethical at all. In fact if there were more brothels that were legal and had good conditions, maybe there would be less street prostitution.
At least in a brothel things like disease can be kept in check and violence to prostitutes is non existent. On the street however it is a totally different story.
Those points aside, as an investor I am here to make money and if I can buy a 5 bedroom house and rent it to a brothel for an enormous yield and cashflow……I say why not, as long as it meets my due dilligence in other areas.
Cheers,
Matt.
As usual AD you have hit the nail on the head with your thoughtful and knowledgeable response.
Cheers,
Matt.
Absolutely AD, once you start to think different to everyone else and start asking how can I do this, anything is possible.
Matt.
quote:
I think private treaty sales are sales that are not listed with an agent ie FSBOs (For Sale By Owner) or individual to trust/company.
A private treaty sale is simply the form of sale where offers made on a property are not public knowledge like they are at auction. Basically any property that is not put to auction is a private treaty regardless of if its with an agent or an FSBO.
Cheers,
Mathew.
I had a read through the document that Michael posted and one section says that beneficiaries and the appointer are protected providing they do not sign a personal guarantee.
In that situation only the assets of the trust could be liable. It might be worth taking some time to read the document as it is very helpful.
Cheers,
Matt.
I seem to recall reading somewhere that a profit made by a trust that is not distributed to beneficiaries, may be left in there and not taxed if it can be demonstrated that the trust intends to re-invest that profit.
Maybe I am mistaken but it might be worth looking into.
Cheers,
Mathew.
Hi Fullout,
I was just doing some calculations based on your numbers and wanted to share my figures with you.
Based on that and the purchase figures you mentioned, my calculations are as follows:
Property – $83,000
Deposit – $8,300
Loan – $74,700
I/O rate – 6.11%
Payment – $380/month
P&I rate – 6%
Payment – $447/month
Upfront Costs – 3,735Total cash invested – $12,035
Rent – $520/monthRates – $100/month approx
insurance – $40/month approx
5% vacancy allowance – $52/month
5% maintenance allowance – $52/month
Total – $244/month
P&I costs – $691/month
I/O costs – $624/monthFrom these figures a P&I loan would see you with a $171/month loss and I/O loan would see you with a $104/month loss.
These figures do not take into account any depreciation or other tax benefits, this is purely based on the income and expense of the property.
Now these figures may not be 100% accurate but would probably be very close. At the end of the day you need to ask yourself does purchasing this property get me closer to my goal. Only you can answer that question.
Hope this helps.
Cheers,
Mathew.
quote:
Finally, don’t eat too much chocolate [
]Thanks for the well wishes Steve, I wish the same to yourself and everyone else on the forum.
But c’mon, not to eat too much chocolate…..ain’t gonna happen [
]Cheers.
Matt.
Hi Ziz,
I have just started on my investing future and reading your post about what you have achieved has inspired me in a very positive way.
You mentioned being in Sydney and if it is at all possible I would really appreciate an opportunity to meet with you sometime to hear more about your experiences and learn from someone with your knowledge.
If you have time and don’t mind talking to a relatively new investor, my email address is [email protected]
Cheers,
Mathew.
Do you have to tell the lender what you will use your equity for? I spoke to my lender about refinancing to gain the use of my equity so I can invest in a few properties and he said it didn’t matter what I planned to do with it.
Cheers,
Mathew.
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