Ah, nope, not quite.

Vacancies refers to the length of time that you allow your property to be without a tenant each year.

Initially if it is vacant it is the time you expect it will take to attract a new tenant.

Then, in later years, the time that it will vacant in between one tenant moving out and another tenant moving in.

Personally, I allow 2 weeks each year for vacancies.

Cheers,

Steve McKnight

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Well said Paul.. that is exactly what I was talking about.

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Steve McKnight

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Hi Ireena,

Thanks for your post and welcome to the PropertyInvesting.com community.

In respect to general things to look our for, I’d strongly recommend you read my 10 Laws of property investing success that have been outlined in editions of Insider to date (the monthly newsletter).

Specifically though, you raise a good topic of converstaion about the concept of delayed equity.

These units that you mention you could buy for $460k today and might be worth as much as $700k when they are completed in 2005. Plus, being in Vic. you will also save on stamp duty.

I have no experience in buying this kind of property but I have the following concerns:

1. If you make a mistake, then given the numbers involved, it is likely to be as expensive one. If you want to invest in property I’d encourage you to start with smaller deals and then work your way up.

2. I have friends you purchased a property on St. Kilda road several years ago under the same kind of promise and recently took possession. The property is only just worth what they paid, and if they sold, less than what they paid when you factor in sale costs.

3. I believe that the type of tenant you’ll attract will be a transitory tenant, rather than the more stable family tenant. This adds to the risk in the investment.

4. Interest rates are more likely to go up than down in the medium term, which means that buy the time you settle your likely repayments will be higher than they would be now. Be sure that any financial data you inspect allows for this.

5. About your friend… I don’t want to jump the gun here, but is your friend paid a commission when you buy? ie. is he a sales agent? Hmmmm. Something doesn’t seem quite right about what you have written and smells a bit fishy.

6. Ask for some kind of comparatives with other projects in the area to see if the projections on other deals worked out as planned. There is a huge difference between a budget and reality.

Ok… it’s clear that you need some sort of plan before you do anything []

Work out what it is that you want (and try not to be greedy). Seriously, for $25 a good place to start is the Fast Track tape (available from the resources area). Even if you don’t want +ve cashflow it talks about how to find an area that would be a good place to invest.

I’m concerned by the numbers you are talking about… there seems to be too much risk for someone beginning.

Regards,

Steve McKnight

P.S. Congratulations on the new addition to the family.

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Hi Angie,

You ask:

quote:

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I was wondering if I found my own tenant (ie. the real estate didn’t find it for me) do I still have to pay the one month letting fee still to the agent as stated in the contract? If not, then I could give that to the good tenant as an incentive to stay and bring in her friends….
(thanks Steve)

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I wouldn’t imagine that you would have to pay anything to the r/e agent if you found your own tenant… but at the end of the day it would depend on what the listing agreement said.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Angie,

Bring on the problems!

If it were me I’d immediately sack the rental manager and also look to terminate the lease of the rowdy young adults (for breach of lease).

Then I’d go back to the good tenant and ask her for the names of any people she might know who might be interested in renting the units. Offer her one month’s rent free for each referral that ends up signing a lease (since that is what you would pay as a letting fee anyway).

Commit to giving the units a community theme if possible as I’ve founf that getting the right mix of tenants is the biggest success factor in a block of units.

Use the template in Buyer Beware to shop around for a new rental manager. Then offer an incentive package to new tenants to encourage them to rent with you.

Regards,

Steve McKnight

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Angie,

Well said re: your comments and I love your signature!

My experience is that lenders will provide a maximum lend, since they review all loans based on risk.

The more money that you borrow, then the so too does the risk for the lender in that if you go under then they have a higher exposure.

Just what that maximum lend figure is… who can tell? It depends on policy, the nature of the security and the strength of your network.

I wouls say though that by only borrowing 80% of the purchase price I have found it easier to return to the money well time and time again as lenders know that I have something to lose if things don’t go to plan.

Nathan: Keep posting questions mate. It’s not spamming at all and you are getting some excellent feedback and comments for suggested improvement.

Regards,

Steve McKnight

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Hi Chara,

What help / feedback do you feel you need?

For what it is worth… all housing commission sales that I have known about go to public auction first.

That does not mean you can’t try to approach the powers that be and work around the system… it just might need a little netwroking on your part first.

Regards,

Steve McKnight

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Gillian,

I’d work out some budget numbers that start with how much money you plan to make and then work backwards.

This will reveal the amount of cash you can spend to acquire the home to begin with.

Avoid, at all costs, being swept up with the potential to make a lot of money.

Look at what is happening around the area where you want to invest and see what other developers are doing and also see how easily renovated / new sub-divided properties are selling.

Bye

Steve McKnight

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Hi Nathan,

Thanks for your post and welcome to the PropertyInvesting.com community.

In respect of tips for beginning I certainly want to encourage you to continue working on clearing up any past financial glitches.

The essence of successful property investing begins with successful personal finance management.

In this respect I’d spend some time analysing what went wrong and in doing so trying to identify the specific mistakes you made. Once you know this then you can avoid making the same error in the future.

I have not read either of the resources you mentiond, although I feel it is wise to read widely to educate yourself about the different investment possibilities.

It seems you have taken lease options as a chosen strategy. OK, that’s a good place to start. The next thing is you need to put a deal together. I’d imagine the product you purchased outlines this?

Mentoring? Sure… post your questions here and I’ll certainly lend my experience to your problems.

I’ll even give you some homework to begin with… I want you to find an area within an hour where you live that would provide a positive cashflow outcome.

Might I suggest that you look for properties priced $90,000 and less… and where you could seek a rent return of say $150 per week plus. This is outside the 11 Sec. solution, but it will be a good starting point for you.

Might I also suggest two more resources… if you haven’t already done so, invest the $25 odd dollars for Fast Track.

Also, check out the outline of the different investing strategies, beginning with Lease Options.

Thanks again for your post and for having the courage to make a start.

Regards,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

Welcome to the land of Oz!

You ask:

quote:

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Does the non paying scenario tend to happen a lot?

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Well, in my opinion if it happens once then it happens too often.

As such I take the approach that it is best to carefully pre-qualify the lead before entering into an agreement.

I wouldn’t call the process of getting a defaulter out of a property easy, still, if you can work through the issue still looking to create a win-win outcome then it can happen with a minimum of fuss.

Regards,

Steve McKnight

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