I have found a property with 2 houses & 1 church on it. I want to change the zoning from special to residential B & put budget accomodation targeting the university students. To do this I need up to 12 months in planning & building & approvals. That means I would be out of pocket for that 12 months if I bought the property now, but will be well ahead in the 11 second solution after that time. Does that make it a good deal or a bad deal?
The houses would house enough for 12 people and the church with reno done will house 8 rooms or 16 people (twin share). If 20 people occupy this at $80 each that is $83,200per year. If I outlay 700K to purchase IP and spent 100K to renovate, when outgoing costs not including the loan will be $14666. Would this make it a viable purchase? I would have to borrow the funds. So what would be best – An Interest only loan until completed & then I&P loan after that? Also just to mention that the 2 houses could be rented out at $500 per week, whilst the church is renovated. Does anyone have some feedback for me please???
I have contacted Council to see if I could do it & they said yes, I have contacted an engineer & he gave some advice & then I have contacted others for more advice but don’t know what to do next. I don’t want to let go of a good thing here until I know it is not a goer??? Does anyone have some issues of concern that I may not have thought of yet? And a few opinions on how you would go about it? Please help…[medieval]Are there no Gurus with expert advice this time? Have I got you all stumped? Why not get outside your comfort zones to give me your thoughts!!! Any one?
Hi fbd1,
I’m certainly no guru but I applaud you for thinking outside the box when trying to put a deal together. [thumbsupanim] The way I see it, the end scenario sounds pretty attractive but it’s going to be a hard slog to get there with $700k (approx) worth of loan repayments until your vision comes to fruition. I calculate that interest only repayments on $700k at say 7% are a bit under $4,100. Include your other “outgoings” of about $1,200 a month and you’re up for $5,300 month. If the houses are $500 combined then you’re going to need over $3k per month to meet expenses, if it’s $500 each then it’s only $1k. If the latter is true then depending on your LVR the bank may even capitalise some payments for you. Another option is to get a long settlement so you can get all your approvals done and perhaps even gain access prior to settlement.
During renovation an IO loan would definitely be the way to go and then depending on you goals could possibly be a good option post completion.
I think you are a braver man than I for even considering such a big deal, so well done. It will be interesting to hear what becomes of it all.
In the absence of any Guru response, all the best
Mikefbd1,
I certainly have no experience in this sort of thing, but my suggestion to you is simply to re-ask your question under the “Help Needed” section – it is the section that gets the most attention on this website due to layout.
Perhaps if a moderator/administrator is kind enough, they may even do this for you?
In the meantime, and it does seem as if you have already done this, I must stress that the deal is only as good as the numbers. So make absolutely sure that the numbers DO work out in it before you proceed. The danger in a big project such as this is that it can become very emotional – “I CAN do this!” – and the numbers take a back seat to ego/emotion. Though I’m not suggesting this is occurring here, it’s always something to be aware of.
Best of luck with your project though – I hope it works out for you!
Cheers,
Adam
Oasis Finance
for your Vendor Finance solutions
Achieve the Dream!
[email protected]Hey there fbd1,
seems you have answered all your own questions bar the last 4?
” (1) don’t know what to do next (?) (2) I don’t want to let go of a good thing here until I know it is not a goer???(3) Does anyone have some issues of concern that I may not have thought of yet? (4)And a few opinions on how you would go about it? “
I am no expert, BUT, I like what your proposing! Compared to what some consider these properties are out there BUT you need to WORK to find them, then WORK HARDER to get them off the ground!
(1) Have you had any quotes? $100K to develop the Church sounds very cheap? All your figures seem out a bit or were you rounding down/up?
(2) People as a general rule tend to speak/write words that they don’t realize the full impact of… In this sentence you have asked we/us the reading public to tell you its not a “goerâ€â€¦I am guilty of doing this also as I have a fear of failure/success…Even just the fact that you have attempted to navigate this project says you are a very capable person and more than able to see it through to successful completion, please don’t let anyone tell you otherwise…
(3) Be wary of emotions and speculating unrealistic occupancy rates, referring to question (1) I feel this may be partly where/why your figures are out?
(4) I would be trying to find a partner (silent or JV) so as to have the expertise of someone whom has been there before. Long settlement or part Vendor finance might be an option.
(Where are the big guns? Or is this guy competing with them? LOL)
Hope this helps and that I am not stating the obvious or insulting/offending anyone?
No guru-No expert!
“ask and you shall recieve”
Sincerely, Jarrah
++CASH FLOW PROPERTY HUNTER
(your not hunting if your not hungry)[email protected]
Climbing & Consulting
Arboricultural Services
0431433288“be ye angels?”,
“nay we are but MEN!”I would suggest you do yor sums a little more comprehensively. Renovation costs can be a hidden nightmare if not undertaken thoroughly enough and planning delays can, depending upon the relevant local authority, add considerably to your work timelines.
Have you considered placing an offer, with extended settlement time to allow for further research on your part.
I am providing some Mezzaning funding to someone doing a commercial/residential development in East Perth.
The offer included considerable time for the behind the scenes research to take place with suitable ‘get out clauses’ if the research showed ‘major issues’
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi there looking for Guru,
It sounds like a good deal WITH the proviso as you already know that it is cash flow negative for quite awhile.
The lenders will probably only lend you 70% of price or valuation if you’re lucky.
You have probably underestimated the cost of renovations and you will need to be VERY specific about this.
Town Planners, architects (or designers) and engineers are costly and they are more focused on their fees rather than whether you get the specific townplanning outcome you desire, so be careful and be sure you know that the planning outcome is what you want.
Better still make it a condition of the contract.
You have already jumped out of the crowd in terms of competition so you have less competitors for this deal so the vendor may give you time to settle and if you are very certain he may give you permission to renovate before you settle BUT AGAIN be very sure otherwise this is a recipe for disaster and not to be undertaken by the fainthearted.
You will need to have someone manage the accommodation at the end, either on site manager, yourself….real estate agents probably not the right managers.
Personally I would be going for as many conditions (little deposit, long time to settle) as possible and remember also that this project will tie your money up for quite some time…presumably.
Also what is the expected value of the deal when completed as this would have a great bearing on it as far as I’m concerned.
That is probably enough for now..feel free to ring me anytime and good luck with bolting down the facts and figures…you NEED to do THAT!!!
In principle it is a good deal as far as the superficial facts are concerned and one that would have me doing rigorous DD.
Cheers
Byron SAMByron Sam
Sam,
I’m sorry if you have had bad experiences with consultants before, but the quote below is far from accurate, in the vast majority of cases. Any consultant who is not focused on getting the result their client wants will not be in business for long.
Town Planners, architects (or designers) and engineers are costly and they are more focused on their fees rather than whether you get the specific townplanning outcome you desire, so be careful and be sure you know that the planning outcome is what you want.If you hire a consultant in any of these fields expect to pay a reasonable amount, if they are any good, but this will be a minor expense in the totality of the project. Their performance is also pivotal to the outcome and you should be prepared to pay for good advice.
fbd1,
You should be careful of any advice you get from a council officer, the people on the front desk are generally the most inexperienced, and they are prone to changing their minds anyway. If you think the property is suitable for rezoning do what virtually all successful developers do, seek the advice of a town planning consultant.
Regards
Alistair PerrySounds like a great project. However, I would be looking to minimise risk as much as possible. Try:
1. Purchasing conditional to council approval, this means that you will not need to repay the dept until the project is approved. I would usually give them an extra 5% or so for accepting the condition.
2. Do it as a JV project, that way the risk and profits are split amongst different people.
What is your feasability in this? Forget the 11 second rubish, what you are trying to do here is rezoning and developing a business, this is not a weatherboard house in balarat bringing in passive income! [biggrin] Different ball game!!!!
You need a full feasability study showing areas of risk vs reward, like developers do, also I suspect the turnover of tenants will be alot higher and fall under different legislation to long term tenancies. all this needs to be planned before you even start.
hope this helps!
We buy properties in Adelaide. No Agent Fees.
[email protected]
INCREASE THE CASH FLOW FROM YOUR INVESTMENT PROPERTIES!
http://www.renttoownau.com/ http://www.vendorfinanceau.com/I’ve heard of a few people working on Churches over the years..Not for me though…bad ju-ju[upsidedown]
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculatorhave you thought of sitting down and do a total feasability plan and outcomes on this?
Might I suggest you get yourself a book by Ron Forlee called An Intelligent Guide to Australian Property Development, which gives abreife overview of what you need, then crunch the numbers and produce your plan, get finance etc.
Regards
landbourne
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