quick Cash

Hello Jarrod,

Thanks for your post and welcome to the forum.

Let’s see if I can help you with a few of your concerns…

quote:

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I have a quick cash deal that I would like to complete on a property in Melbourne’s northern suburbs. I have a few problems with the deal, that I thought someone from the forum might be able to help me with.

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It might be wise to spell out a little more about what you mean by ‘quick cash’ – as these days that tern can mean a number of things. I expect that you mean a flip, that is, buy it and then resell it during the settlement period.

quote:

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The property is being sold because the owner has relocated to another state. It is a brand new house from a house and land package. The house is valued at 225,000-235,000 and I believe I can purchase it for about 195,000 based on conversations with the owner.

The problem is I would like to sell the house straight away but I am concerned the closing costs will make the deal not worth much at all.

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Hmmmm – it’s an interesting situation here. You have found a potentially under-priced property (I would due more due diligence to establish this) and you seem to have a sale figure in mind too (again, I suggest more due diligence to get a more reliable figure).

Your due diligence is designed to remove ‘approximates’ and thurn them into certainties. For example, stamp duty at $195,000 would be $7,360 + a $570 Transfer Fee.

The more you know about the figures the better your investment decision would be.

As for the other costs, get written quotes and turn estimates into definites.

Now let’s look at those numbers, working backwards…

Sale Price $235,000
Closing Costs ($7,930)
Legals ($500)
Landscaping ($3,000)
Agent’s Commisison ($15,000)
Purchase Price ($195,000)

Balance $13,570

Now only you can make a decision as to whether the investment is worth the risk… but if the place sells for less than $235k then in my opinion you are starting to look a bit skinny.

Alternatives

Perhaps a better idea is to try and buy an option over the property at the low price and then sell the option to someone else. This raises some issues about being a licensed real estate agent that you should investigate… but it may allow you to by-pass stamp duty and also agent’s costs if you can deal direct with the buyer.

This means you will have to mount your own advertising campaign, but more work will probably mean higher profits.

Exit Stratgey

If you go ahead, I’d also work on Plan B for the investment on the basis that you have to close… what would you do with it then and what would the financial consequences be?

I commend you on finding a deal, but would encourage you to work hard to develop a realistic plan that deals with more certain numbers and evaluates how easy it would be to find a seller willing to pay $235k in a presumably new housing estate where builders / developers might be cutting deals left, right and centre.

Good luck. I’m sure the forum would love to know how you get on.

Bye

Steve McKnight