Forum Replies Created
hleung – what is the basis of the valuations? Mortgage purposes or sale? Two different objectives considering who is paying for the val to be undertaken.
There is no difference between the bank's valuer and your own, only the purpose of the valuation. They will rely on the same data and undertake the same process however the bank's valuer may not even do a 'drive-by' if they are using RP Data for their information as it comes with a snapshot of the building facade or an overhead shot.
Why pay someone else when you can fly down (even on a weekend or take a day off)? This cost will form part of your asset base anyway.
Big risk considering all of the unknowns. As highlighted above – what don't you see in the pictures? A site visit by yourself or partner who knows your criteria will be well worth it.
I'd agree with 5% + gst & postage however this is based on 2 or more properties in the same area. I'm getting commercial rates around the 4% as well.
Looks in the Hills district – close to M7/M2 and T Ways. Has been major spending on infrastructure in the area and is primed.
There is no harm in trying. When faced with either a 'no sale' and loss of all the marketing momentum you can negotiate your own terms to the vendor. After all, they are trying to sell the property and if your offer is just about the timing & deposit then you may be able to get the deal done as long as you aren't asking for something which is ridiculous.
Be wary that the conditions of the auction still apply for a period of time post auction (hence you are in the favoured position) however there is no cooling off period if you commit. If you were prepared to buy at auction then this wouldn't present a drama.
An external (drive-by) valuation will not establish the condition of the house internally. For the valuer to fully appreciate the property he must undertake a thorough inspection – externals will reveal the age and assumptions will be made based on the external appearance of the property – eg 1970's b/v 3 bedroom with slg, 1 1/2 bathrooms – this will provide the basis of determining that the house is 30-35% through its life cycle, in average condition etc. If he went inside he would discover that it is a 3 bed, ens, bath, tandem garage, new kit etc so his perception of the premises would change dramatically (and he would still be able to justify his valuation).
Renovation does lead to a much better rent, especially in a tight market – it puts you at an advantage.
cu@thetop, commercial property does have more risks associated with it compared to residential however I don't see any of the LPTs investing in houses & units.
Depending on the type of investment, IRR will vary anywhere between 15% &30%+ depending upon the risk of the property/project. Modelling of returns is much more detailed than 'back of the envelope' stuff as these investors are there to make money not take up negative gearing losses (not deductible inside the trust).
I have to wonder what people are thinking when they buy commercial/retail premises on a very tight yield – unless there is a great upside ie development potential or upcoming market rent reviews these properties only provide good certainty of cashflow if they are well located with a good covenant in place.
I rarely see incentives greater than 3 months on a five year lease unless rent is then inflated to mask the cost of the incentives. In the scope of things, longer term leases provide security of the rental stream, vacancies will run around the 5% mark if the property is well managed & well maintained etc.
Prusli, what were the instructions given to the valuer (if any)? Were they directed for mortgage valuation/lending purposes? Sale of Propertty/Divorce Settlement? Building insurance/Replacement Value?
The valuation will be based on actual sales of comparable properties, unlike commercial property which will be valued on yield and the secondary methodology of comparable sales. A high rent may be more symptomatic of the low vacancy rates/high demand and a correction in yields as opposed to reflecting a higher price.
Is there any perculiarity with the property eg: easements, restrictive covenants etc
Is the current use the highest and best use? ie is it zoned for units/townhouses (either by itself or amalgamated with other blocks)?
The market appraisals offered by real estate agents are only opinions and basically not worth the paper that they are written on – used by the agent as a marketing tool to get your business.
If you are concerned with the valuation, discuss it with the valuer to determine how he has come the the conclusion that he has – there may be some scope for discussion & revision. He may be able to clarify why he has or hasn't considered a particular relevant sale.
I am not saying that the valuer may have been conservative in this appraisal but may have taken into consideration such factors as increasing interest rates and their dampening effect on prices.
As I noted Astrawan, Willing Buyer & Willing Seller – unfortunately it sounds like you were too willing to listen to your agent (who's only real concern is getting his $ at the end of the sale – no sale meand no $).
Consult your solicitor however I don't believe that you can get the agent for misleading or misrepresentation if you have agreed to drop your price by $100k
An auction is just that – certainty of a sale at or above an agreed price. Willing buyer & Willing Seller etc. In NSW there is a Section 66W (or something along those lines) which allows a purchaser to waive the cooling off period however this does not apply in the case of an auction.
There would be bedlam if an auction didnot provide finality. Think of all of that marketing etc paid for no result. What you may consider are two different scenarios – not advising the agent of the reserve price (this allows you to keep some degree of control by making the agent refer the highest bid to yourself and then enter into negotiation for the sale (the property must be genuinely up for sale) alternatively you can use your vendor's bid – this may kill the auction or elicit one overly keen buyer. Another approach would be to reserve the first and last rights to purchase (even though you own it), this will prevent many from bidding as they have no certainty of winning at the auction.
Seriously guys, do you actually understand the scope of work or the cost of a loaf of bread today or are you happy paying Coles & Woolies the $3.60 ish each day when you can pick up the identical no frills loaf for a dollar less? Are you happy about paying $6 for a dozen free range eggs or do you prefer $3 from the farm gate?
Sparkies & Plumbers have always been expensive trades (always have the highest charge out rates & award rates of pay) – why? They deal with stuff that requires a great deal of skill (can kill) or will leave you lying in a pool of sh!t.
With plumbing supplies there is only one major manufacturer Caroma, not quite a monopoly but they have absorbed a number of manufacturers over the years including Fowler, Watson Crane, Donson and others.
Electrical supplies on the other hand we have to deal with wholesalers (who in turn buy off importers and the manufacturers).
I find it hard to believe that Sharlene can get that scope of work completed for sub-$400 including the supply of materials (most fluoros are either 2' or 4' so unless they were extermely 'special' or 2nd hand they would not have been cheap (I have been involved in the industry for a number of years), by the sounds of it there was a full day's work an at a normal chargeout rate labour would have exceeded the $300.I'd agree that ttman had paid through the nose – a downlight complete with magnetic transformer can be bought for less than a$30 (electronic transformers are considerably more expensive but cheaper to run). A single downlight would not replace a traditional light fitting – you would need at least 2 or more in the room to get the same coverage as they are a 50W narrow beam light.
A database of pricing is useless unless you know and understand the inclusions – you need to compare apples for apples. As investors you should understand this. If I said I could sell you a house returning 15% you would check it out. (is it nett, gross, combined rent/capital growth etc). Check out your subbies, get a quote don't just rely on 'yeah, he's a mate etc he'll do the right thing'.
Consider the following scenario: Build a side by side duplex on the block on the Central Coast, live in one, rent out the other. Both will have the water frontage & command premium rents. Downside: not subdivisible (also need to check with council about allowing you to build duplexes), you won't have an income on that property whilst you rebuild (unless you can build creatively & retain the house until the new place is built). Sell the unit or find a new tenant & split the rent with your brother.
It has as much chance of flying as a combined NZ/Aus economy.
All off the plan deals are based on assumptions – lots of them, the further out/longer the project the riskier those assumptions become. There are projections for future market value, future rental, depreciation etc. Your only known items are the upfront purchase costs (in today's dollars).
Get familiar with your target market (if it is Byron – either eco tourists, grey army/life changers etc, generally cashed up).
Check out what similar resorts/locations are worth – this may mean looking outside of the box ie Coffs Harbour/Ballina/Port Mac/Coolangatta etc. Familiarity with similar operations give you a great insight of how this one may perform. Remember, that the first few years are the hardest as they will be establishing a client base, high expenses and low returns (unless all of the planets are aligned).Assuming that you are buying into a hotel/resort type operation:
What restrictions will there be on the property owner – is there a management company to be appointed to manage the premises? What are their duties? What fees will be payable to them? Is income pooled or assigned based on actual occupancy? Does the management co pay a fixed rental to the owners? How long is the management agreement? What escalation costs are factored into the agreement? Are owners liable for periodic refurbishment? If so, how often?SNM
I'd agree with terry on the latter. You will need to capitalise any costs relating to your research on a new ip and add that to the cost base. If you can, investigate another ip near your existing one and claim the cost of the trip on your existing ip.
In NSW the vendor is legally permitted to make a single bid. This is a tactic used either to stimulate bidding or to bring the auction closer to finality. This is allowable in order to stamp out 'false bids' which are elicited from passing traffic, dogs, signposts or non-registered buyers.
In the first instance, if no-one will start the bidding or if bidding has stalled the vendor can put in a single bid to try to get things rolling.
Alternatively, if the bidding is nowhere near the reserve, the vendor may put in a bid near/below the reserve either to point to the reserve (ie the next bid will bring it 'onto the market' etc) or use the bid as a showstopper if noone is interested at the price. Usually noted as VB in the results.
BTW if the note in the paper is 'HB' this is the highest bid and the property did not sell at auction. A sale is designated as 'S'.
As far as I know, tenants in common are permitted to independently sell their own portion of the property. This sounds good in theory however who wants to buy only 75% of it? Not many. Consequently it will result in a lower price being achieved for the parties involved – hence the other parties wanting you to join in the sale of the entire property.
Is it an option for you to buy the other 75% or another 25% + another party/associate/friend buying the other 50%?
Selling for you at the moment may not be the best option (trigger of capital gain etc) – so look at other avenues.
Donkey, high cashflow generally equates to low capital growth. check some of the previous forums on similar topics of investing in the CBD and its pitfalls. It all depends on your strategy.
FWIW i'd be looking at a few of the middle distance suburbs at the moment where there is good transport (rail, TWays & motorways). They may not be in favour in the next year or two but there will be a resurgence in people wanting to buy and redevelop in these middle distance suburbs (just a little past Parramatta). Not sure what the equivalent Melbourne suburbs would be but it would be the 'fibro belt' on 600 m2 + blocks just past the end of the tram infrastructure.
Thanks – I currently use Property Pro (from the same people as POSH – giving this one a demo). I am also trying a demo of Rent Master & Rent Trust, all sub $1k programs.
I find many of the cheapies are limited in what they can do and I don't need a whiz bang system which does trust accounting, or compliance for agencies (divestment of commissions, listings, placement of adverts etc).
As Tools said, Pilks is a manufacturer (another is G James). All glass must comply with the Aust Glazing Code AS1288. Current council requirements also stipulate reflectivity, transmission etc. What do you consider is 'thin glass"? – 2mm is picture frame glass which was often used in clear leadlight windows (1920's), 3.5 mm approx in most windows < 1m2 otherwise should be using laminated glass or toughened glass (safety glass) as it posses a danger if you run into it.
70% of your walls are glazed – this is extremely high as most are around 5-10% (thought to self – must be a highrise on an island in Sydney Harbour).
High efficiency single glazing will reduce heat loss compared to clear glass however it will be pricey – you should consider all of your options (visit the home efficiency websites for suggestions on reducing heat gain/loss). Another option may be a cheap version of double glazing (magnetite?) which is a framed perspex window infill fixed onto the existing frame with magnets – has a similar effect as double glazing.
