Forum Replies Created
Thanks Terryw, no I wasn't that was what was confusing me!
Scott – I think this is what has happened.
So when doing a feasibilty study do you look for the IRR to be over 20% or the MDC over 20% or both??
You could always make some changes to the property to try to up the rent. I agree with Terryw though, if you are unsure about capital growth etc I wouldn't jump into a property that is that negitively geared. Good luck.
Hi Luke,
Council fees really surprised me first time round. If you are splitting the title budget around $20,000 in council fees (depending on many different things) and lots of time so more holding costs. Have you made sure the zoning is consistent with your plans? You can check out the property you want to purchase here: http://services.land.vic.gov.au/landchannel/jsp/reports/ReportsIntro.jsp
This is an awesome site which shows any zoning laws or overlays that could affect your property.
Selling and conveyancing fees are also something that can be overlooked. GST can be a killer as well. I would do some serious number crunching and then think about getting a feasibility study done (costs about $500).
Good luck and keep us posted!
Seems to be a lot of effort for a very little profit.
Have you progressed further with this deal?
Would you not consider doing the development yourself?
Hi alice10 – I pay would say around $600 to get a feasibility study done.
I'm not that into passive investing so my first thought when I read your post was that I would buy the $400K property, rent out the house and subdivide the land – selling the block to take a huge chunk off the mortgage thereby creating a +ve cash flow property.
Hi Alex,
This is my partner and I. It's not that he is not interested per se (although I'm sure that his attention span has something to do with it!) but I am just much better at finding real estate and seeing what it COULD be, not what it is or what it is being sold as. I don't usually talk to him about anything until I can package it all up and present it to him neatly. That is when he takes over.
He is so good at motivating tradies (in the case of reno's or building) and keeping me motivated (when it comes to dealing with council etc). So you don't have to have the exact same skills to make a good partnership. In fact I think it is better if you both bring different things to the table.
Good luck with it all.
Jess
Yep, just spoke to council. They said it is doable but would have to look at the frontage of the block to make sure it is not too narrow.
She also said that we could sell the back blocks with just the easment in place which would save us road cost but we would probably have to drop the price of the blocks to reflect the fact that there is no road or services. Although I did get a quote on a court and I thought it was fairly reasonable at $80K.
How do you buy something and then have faith that all the planning stuff will go ahead?? Bit scarier than I thought….
v8ghia wrote:Hi Jess,Some lenders will take more than a 20 % variance on your figures upwards and use – but needs to be explained logically – ie 1 st year had XXX amount of set up expenses, and as a result of our business plan we have expanded our service area, and increased revenue as forecasted" – the lender may even pas out from shock at someone having a business plan!
All I can pass on that I can guarantee will help – is you can't have your cake and eat it. ……Meaning – if (not saying you do!) you want to stick cash in your pocket, run all your personal expenses via the business, and let your accountant encourage you to 'buy new vehicles & spend up big to minimize tax' you really are not doing yourself any favours at all – IF you want to be borrowing money anytime soon.
Run a tight ship, knuckle down this financial year, and late 2011 will look better, and come around quick.Cheers
I so get the having your cake and eating it too. It seems you can do it two different ways – one way you don't pay much tax but can't borrow, the other you pay lots of tax but may be able to borrow.
I think I've worked out that we won't be able to borrow. So now I'm looking at forming some sort of syndicate.
Could I access the equity in my PPOR for a deposit and have someone else (with lending power who doesn't have a deposit) get the loan for the property.
What are the pitfalls of syndicates?
Thanks for your replys!
We haven't actually had our '10 financials done yet, the $45K figure has been lifted off my MYOB accounts (I keep very tidy books). Does this change the low doc thing? I don't want to do things dodgy, would prefer to wait if that is the case.
Would it be better to go straight to our current bank instead of a broker? We have been with the same bank for years, have never been late on any payments and have had all our accounts (including all the business accounts) with them. I did a business plan for them back when we started (in '08) to try to get a business loan but that was knocked back. We started the business anyway and have been (relatively) successful.
Just wondering if our history would be a plus with this lender in particular or whether we should try to play the field of lenders.
Just another question – we will be lending money for an active investment (we will be actively increasing the value of the property) then selling quickly. Will the banks look at the engineers feasibility to see that we will be making money by doing this or do they not take on those sort of risks?
We have been in business since April '08, as you can imagine that tax return wasn't awesome. Then the '09 return wasn't grand either because of the set up costs – lots of capital purchases etc.
The '10 return will be better (around 45k clear) but that is for both of us (we are partners in the business) and we have 3 children. On the up side we owe $220k on our PPOR but it has been independantly valued (by the bank) at $390K. This is because of the money we have made in RE previously.
I spoke to one broker who said "Most lenders will want to see 2 yrs financials to judge your income. The most they will take is a 20% increase from one year to the next."
Not sure I understand this – so the banks won't accept it if the business has grown (in income) more than 20%?
Hey everyone,
My name is Jess and I have been "playing" the game of real estate for about 6 years now. Feel like it is time to step up a bit and feel like education is the way to go so thought this forum would be a great starting point.
I live in the Macedon Ranges (about an hour out of Melbourne) and am more interested in rual properties rather than city ones. This may be because I know nothing about the city.
Looking forward to learning the ropes off those more experienced!
WOW SuperSleuth what a great post. Very confronting but feels very true to me.
I went to Ysa free seminar last week and loved it, but I too believe that many people attend workshop after workshop and never really do anything.
The thing I think may be worthwhile about these sort of seminars (especially Carly and Ysa's) is the opportunity to find other people who are willing to form syndicates/JV's. Those courses would be great networking tools.
I would be worried that they over complicate things and make it difficult to find your own methods and what works for you. I think to be truely successful in this industry you need to find your own unique way of doing things.
Thanks SuperSleuth!
Jess
