resiwealth,

Im sure not my issue is gearing…? Obviously it’s going to be very negative until development finishes.

I see that my issue is not using the full leverage potentially available to them (he may have crappy servicability, but assuming otherwise). Unless I am not understanding you correctly.

I can understand the points raised by others.

Are you propositioning me? [crying]

Im seriously straight. Married even. Straight married. [biggrin]

So that is something that developers commonly do then?

I just would have thought the risk would be worth it. But I guess as the property is IN development they may not have a cashflow. Or, if they do have money set aside for repayments, any overruns in time is going to hurt profitability.

If I had a million:

– I could get a loan for 5million. BUT, I need to make sure I have at very least 30k a month interest to service the loan. But make *potentially* 5 times the profit.
OR
– I could buy a million dollar property. Overruns no issue.
OR
– Would it be possible to say borrow 5mil, use 4mil and use the 1mil as a ~3yr buffer for loan repayments? Assuming you already had the servicability, but didn’t want to use it on this loan.

Obviously this is very simplistic thinking. Curious though.

Win-win agreements are ideal, I personally dont believe you should ever consciously make a win-lose deal. Though the point I was attempting to make was when something changes and the contract is referred to, most likely in the case of termination. The contract is likely not going to be complex enough to provide an adequate win-win split. One person will likely be put out. Either from lost profits, inconvenience or whatever.

Sure, as friends you should just cop it sweet. But people find it easy to resent those who comprimise ones self interest, even if it’s of their own doing. Alot of people dislike other people for one reason or another. We dont have a group of people who are universally disliked by everyone. Everyone has friends. People just find reasons not to like someone else. And this is one reason that many many people have problems over. I’d prefer to give unconditionally, no assumptions or find a way I can help them help themselves. But that’s just going way overboard explaining.

byronent,

I needed to understand if there was an angle or something that his plan was doing that I didnt consider. I did not make sense to me that his plan was featured when he could have done something better. [provided security is less of a worry for the investor]

I like to question, I like to understand things that I do not.

also…

‘Chance favors the prepared mind.’
— Louis Pasteur

How about for rental value?

Would being that close be a good or bad thing?

I would think for people without cars it would be nice. Though, the noise still could be a pain.

byronent,

I am suprised that with his education, youth and family history that he did not use the capital he had to gain more funds to appropriate a greater portfolio. *Especially* because of his education. Because he didn’t take on that additional ‘risk’.

Though I applaud the decision to put all of his eggs in one basket. Those who have read on Buffet (even Steve touches on it) know that diversification does reduce risk, but it also reduces returns. Risk is mitigated through focus as you (should) understand the investment vehicle much better than if you were to try and understand many. Making you more capable of identifying and investing in an excellent transaction.

Nah, it’s like a couple of peoples signatures. ‘Go hard, or go home!’ [biggrin]

I get your point. I did not consider it from a security point of view. Though, being 22 and having parents who are likely to be rich anyway, I would have thought he’s be up for a little more risk.

That being said, I would gladly accept 600k capital if anyone was interested in knowing what someone who is a little less risk averse would do with the money. PM me! … not all at once though thanks. [happy3]