great deal-long lease..potential troubles?help!!

Just make sure you get insurances that cover you. Otherwise, if he is doing something illegal, and something happens, you may not be covered?

What is the capital growth potential? Is it is a good area?

What happens if this guy goes down. could you rent it out yourself at a similar amount? Or how much would you have to drop it, if you couldn’t rent the rooms separately?

What LVR will your bank lend? Probably standard, as you will be just renting it to one person, not operating a boarding house.

Terryw
Discover Home Loans
Parramatta
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Hi rumin, thanks for the PM. Well, are you going to share with us some of the numbers, after all, this game we play is a numbers game. If not, at least a nett yield figure ??

Onto the due diligence and whether you are a worrywart ??

First thing I’d be comparing is the land value vs the asking price. What is the percentage ?? How much are you paying for the building and how much are you paying for the Lease being offered and maybe even some of his profit ?? Get that Land value% up as high as possible I reckon. That covers your butt if everythig hits the fan.

Next, I’d get onto a cracking hot Lease writer and tie this guy up into about 7 different knots. Terms like “the Lessee shall etc”. Make him pay for all of your outgoings – especially the insurance side of things, not just the utilities. If he baulks, he’s playing it cool and having a lend of you.

Take everything you’ve learnt being a ressy landlord and throw it out the window…..you’re playing on a different oval with this one.

I’d get an option period negotiated in the main Lease, so you don’t have to do it all again in 3 yrs time….especially if everything goes well. Don’t just look on the downside, some of my best deals have come about after everyone said the property / buildings and inherited tenants were rubbish. Who cares right ?? They were comparing the deal with their little 4×2 brick house hat on, and it doesn’t compute.

Find out about those other boarding houses he has…..”he seems to” doesn’t cut it. get rid of the rumours and act on fact. Go for a drive and have a squizz how he really runs them.

The whole boarding house / fire risk thing scares the beejesus out of me….wouldn’t touch it with a barge pole personally but it may suit your profile. I have enough trouble dealing with on eor two whinging residential tenants, I couldn’t even imagine dealing with 8 or 9….I’d go nuts.

What’s the immediate surroundings buildings like ?? Are they ressy or have you got good infrastructure / public transport for his clients ?? If you are in Japan, who’s doing the on ground legwork for you ?? Are you planning on crawling through it before you buy, or sight unseen and rely on 3rd party inspections ??

Finally don’t believe a word the REA or his opposing mate tells you casually off to the side. Legally, everything they say and incredibly everything they write down means absolutely nothing and won’t stand up in a court of law, so don’t place too much emphasis on what they say.

Final word – tackling your first non-ressy thing, I’d go for something a little easier with less people involved and then work your way up from there. If you think it’s still the very best deal on offer to you, taking in your remoteness to the IP, and you reckon you can handle the argy bargy you are no doubt going to have to endure – best of luck.

Cheers.

Hi Rumin

I think you had better assume the tenant will be a high risk. It may still be worth the risk, but you have to assess if they stop paying rent, can you kick them out easily? Can you take over and run it yourself or can you just lease the whole house out again at similar rates?

Terryw
Discover Home Loans
Parramatta
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