Forum Replies Created
Blogs, it is the market which determines remuneration not the vendor, that's why it is called negotiation. In life everything's negotiable.
Getting back to coffee, I know plenty of coffee operators who have turnovers in excess of $1M pa, you need it to survive in a regional shopping centre and yes they pull out their $120k+ even when their premises are under management (they actually get less than what the lessor does).
But seriously, RE is all about presentation – would you buy a house from an agent who drives around in a VN commodore maaaate? Nor do they drive around in Mazzos or Lambos (two door cars are not very conducive to getting larger/older/less mobile clients around), they need sensible 4 door cars with auto gearboxes. (My local hardware store owner lives on Sydney waterfront too).
How can you assume how much it costs to make a sale, afterall they have to have the flashest cars in town? If it takes the full 3 months to make a sale they have to wait another month & a half until they see their commission ie 4.5 months before they see a cent in the meantime having paid rent, wages, advertising, super, workers comp, office equipment costs, power etc. Best case scenario is they will have to wait 1.5 months if they sell at the first opening. Unlike the coffee operator.
In a difficult market, margins move (along with property prices), agents have to work (well occasionally) for their commissions in markets like those of recent times. Good agents survive, poor agents obviously must drive classic cars.
Nitro, lease prep is normally a shared cost & it is regulated by office of fair trading (NSW) – you are acting as the sub-lessor, so you would pay around $15 + 2x $1.50 gst (government logic is that the tenant shouldn't be liable for the gst so you would pay it for both parties). Advertising – depends where & how often but expect at least $70/advert (probably about $200/week) and agent will take 1 week's rent as letting fee.
We don't haggle over the price of a capuccino with a gross profit of 75% why bother with agents? (you'd probably spend just as much on your twice daily caps over a couple of years as you would with your agent).
No. Everyone's cost of borrowing is different – neither finance nor tax/depreciation enter the equation.
You should be working with net yield not gross that way you can compare different asset classes/investments ie how would you compare a share returning 5% capital growth & 4% dividends (fully franked) with the property example above? Very difficult.
Blogs, you're dreaming….. Agents working for the vendor also charge a % of the sale price. Do you attack them for not working solely for you when you come to sell? Do you always multi-list your sales? Do you rely on the agent to recommend the best method for selling your property (auction/private treaty/EOI/tender)? Do you have an open agency agreement with your agents? No, of course not, you are after the best price which is usually achieved by having one agency working on the sale – it may sell at the first opening or it may take 6-8months. If it sells quickly for more than you would have settled for, do you require the agent to drop their price?
Conversely, buyers agents have several clients. They may find the perfect property at the first inspection or at the fifty first. Do they charge you any differently? Do they charge you by the hour/per km driven/number of inspections/by the number of properties that they have viewed and rejected? As for costs – they all have their running costs (RPData/Residex etc), site inspections, time spent with agents to find the right properties, time spent with the client to discuss the brief (so that they don't waste your time and theirs), insurances, mv, phones, staff (some do use others for their research).
It may not seem like much to yourself however the right buyers agent can achieve better results for their clients than hacks oops investors without the right skill base. Luck may play a great part in your negotiations however strategy, knowledge, skill of the negotiator play a larger part. Who negotiates more often – the real estate agent selling a property/buyers agent or the investor who might buy one property every few months/years? Who has developed a greater skill set when it comes to negotiating the sale/purchase (very different skills)?
There are many first time investors who lack the confidence to negotiate a purchase, bid at an auction, undertake due diligence, number crunch who have the foresight to understand that they don't know and ask a consultant to do their bidding. Even seasoned investors engage agents for this purpose (yes they may be playing for bigger stakes but if they have paid too much for a site, their numbers will not stack up). All they want at the end of the day is the feasibility study which backs their business plan not have all of the BS when it comes to fielding 20 possibilities.
(rant off).
Have you tried any of the pro-bono lawyers? They cost you nothing and take their fee out of whatever they win eg Keddies but they have had some bad press?
Development work at sub-25%, not worth the risk. Faced with a project which has kicked off about 2 years ago, rising interest rates (now a reversal), a price correction in the market of 20+% and slowing demand, they would be out the back door by at least 6%.
I/O loans work on the theory that property markets always rise causing your equity to increase – many have now learned that this is not the case. Basically you pay interest for the term of the loan and the amount that you 'save' by not paying back principle can be used for other purposes.
These loans work well in rising markets but can leave you with a shortfall if the market corrects and you need to borrow more to fund other investments.
Depending upon how much you need, you could consider 180 day (or longer) bank bills. A little bit of a pain as you have to roll them over (refinance) every 6 months, fixed rate of interest, refinancing rate is the prevailing rate (advertised rate + margin/risk), interest is paid upfront however they are quite effective.
You may need to get the right bod in the bank (ours was the manager of the branch where we held some major accounts with back in the days before personal bankers or mortgage brokers).
As you are already an investor, persuing another property is not out of the realms of what you already do so even though there is no property which has been purchased you most likely can either capitalise these costs (of failure) against the next property that you purchase or call them part of your costs of doing business. How you go about it would depend upon your business structure.
Nitro, the catch is item a) THE TENANT AND THE LESSOR AGREE IN WRITING.
That is, you may be lucky and the owner will agree to terminate however it would be more likely that they will agree when you to pay all costs up to an including a new tenant taking possession (includes lease prep, adverts, inspections and agent commission etc).
SHales wrote:I also have a personal dislike for anything which does not include freehold.s
Shales, strata title, community title and stratum titles are all forms of freehold (crown guarantees the title). However you have closer living quarters & shared rights over the freehold.
Old System is also freehold title without the crown guarantee.
They are also on the survey. Plus they have their own research and the benefit of many, many asset managers & valuers.
I pay more attention to those published by the Australian Property Institute from their quarterly surveys. Survey results are based on responses from property mgrs, valuers, asset managers, developers etc.
April survey shows each state & category are still on the way down with a long way to go before any sign of recovery. So buy, buy, buy (for at least another year or 2).
Geez I'm glad that I don't go to these things. Thanks for the commentary and I'm glad that you got something very important out of it (a few cups of coffee, a sore backside and a very important lesson learned).
Which state and which version of the RTA and what is the rest of the clause?
But generally, if you are currently under lease then you have obligations for the term of the lease (until such time that you are able to get a new tenant, if there is a shortfall in rent, you pick that up).
Levi, you've almost answered your own question with regards to moving – it will knock your savings around & set you back by about 20 months of the additional savings (ie you will need to stay in the new/cheaper rental for 20 months to benefit from the lower cost as well as taking out 2 months of your current savings).
Many on this site (as well as the banks) would steer you away from studio units (more difficult to borrow against/lower LVR, higher turnover of tenant).
You will need to consider your own situation as to what matches your risk profile – an affordable investment (whether it be inner city unit or semi/house further out) vs max out bank borrowings (high risk if you do not have a secure job, planning for kids/time out of the workforce and are reliant on the rent to make mortgage & outgoings payments).
I know that the victorians are a little bit victorian with their systems but I didn't think that you could bring a property to the market without having a contract in play ie the vendor has to stump up with a contact with full disclosure (title details, sewer diagram, S149 certificate etc). How do you know what you are buying until you have a contract in your hands?
What are the chances of you moving into a rental and renting out your house? It gets him off your back as you are no longer in the house, you have a renter in the house ie not his ppor or anything else as there is a lease in place to confirm that he doesn't live there and you have someone contributing to the mortgage & your tax deductions.
