Well, we were planning on taking a break from all of this property buying nonsense, especially after finalising our two industrial basket cases that are now doing just fine and dandy. Thought we’d take a year or two off from buying and smell the roses and see where that took us….but everyone on here knows I’ve got the investing bug now and can see the light at the end of the job tunnel.
So, we jumped in and put an offer in on a rather nice smelly place out in the industrial wastelands of Perth (less than 20km from CBD). The property didn’t fit all of our stringent financial criteria, but then I got a bit sick of cleaning up other people’s disgusting mess, and so this one has way less work to do, and in fact is in quite good nick, ready to lease out to some big corporation. You pay for it mind you, and the numbers don’t look that crash hot compared to what we’ve done in the past, but it’ll keep us ticking along for the 2006 year getting it sorted and up and running.
This deal is way bigger than anything we’ve done before, and was a tad large for us to handle on our own, and so for the first time we have included a JVP to come along for the ride. They have a silent 10% stake and we’ll see how that pans out. If all goes well, we might consider taking on more JVP’s to acquire some of the really nice fruit at the top of the tree that is to date out of our reach. And no, we don’t have a 35 page JVP agreement drawn up with a bevy of lawyers trolling through every detail.
I’ve wound back the below fin. numbers in an identical ratio to bring it back to a normal scale of a typical house. Please don’t go searching the websites for a house for sale at $ 223 K renting at $ 642 p.w., they definitely do not exist.
I suppose the biggest eye opener for us is that the deals get better and better if you can lift yourself out of the ordinary levels of investing and really get stuck into the good stuff that the big boys sniff around. We are finding scale is everything in this proeprty buying game we all play, similar to the farming catchcry “Either get big or get out”.
Anyway, to the deal specifics ;
Capital
Purchase Price $ 223 K
Acquisition Costs $ 13 K
Loan Amount $ 240 K
Land Value $ 145 K (only 65%, not as high as we’d like but hey..)
Building Improvements $ 95 K (nothing to do for a change)Cashflow
Loan Repayments $ 346 p.w. (Interest only…..our only expense)
Outgoings $ 86 p.w. (Tenants kindly pay this for us)
Nett rent $ 556 p.w.
Gross rent $ 642 p.w.Unfortunately the Tenant is only short term, and hence the biggest challenge for us as investors is to market the property such that we can secure another tenant. We are shooting for someone willing to sign up for 10 years on something like an initial rent of $ 600 p.w.
Two years ago we wouldn’t of taken this challenge on, but with our negotiating experience now with industrial companies and established network of grubby truck drivers, we feel confident that within the eight months we have, we’ll find a suitable Lessee.
If we are unsuccessful, it’ll be back to the soup kitchens for us. If we are successful, the job will be given the flick and it’s back to Oz I come to do this carry on full time. Wish us luck.
P.S. Don’t ask what the ratio multiplier is….the numbers were posted for information purposes only to make the deal more tangible. I find most people bring any fin. deal back to a normal house deal ‘cos that’s what their frame of reference is.
Hey Dazzling I do wish you luck, although you really don’t need it, you’ve been preapred to take the risk for the return so as far as I can see you deserve to be able to retire, you’d done the hard yards to get there.
Best Wishes though, I hope it all comes together for you. It’s great to hear when someone reaches their goals. Well done.
Regards
PK.Dazzling,
Great to hear! Well done – after reading Kiyosaki’s “Retire Young Retire Rich” where he talks about it becoming easier and easier as you move further up in the investing world, I have often thought about this concept. So it’s really good and encouraging to hear about a “real” person actually living this concept (and in Australia too!).
Again – good for you, and best of luck with finding that tenant!
Cheers,
Adam
Oasis Finance
for your Vendor Finance solutions
Achieve the Dream!
[email protected]Congrats on another pearler Dazzling….again not from luck but from putting in the hard yards to make it happen. I know what you mean by this ‘addiction’ to real estate and the good intentions we have about taking a break.
I have just finished a “mother of all reno’s” in Mandurah. From a flea-bitten, mouse-infested rubbish tip (inside and out) to a beautifully finished property with a valuation of $30k more (in 3 months) than I paid all up, great capital gains ticking along, and already tenanted. I wish I was clever enough to post some before/after pics as you wouldn’t believe the state of it….e.g., how does 7kg of polyfilla needed on internal walls sound!!!
I promised my partner that was the final purchase for me, and I’ve managed to keep my promise for ….several weeks so far…. but I’ve just come off the realestate.com.au website, and also just had news from an agent I use about a local ‘dump’ needing reno…..it was all I could do to close off the email without picking up the phone.[biggrin]I’ve been wondering what you’ve been up to while on dry land. I’m surprised Dazzling no bobact and skip bin ? Yes I think this property stuff is like a drug. We’re coming to the end of our latest reno and I already find myself trawling realestate.com despite my exhaustion. Well I’ll have a break at least over the school holidays.
Well done on your purchase and please stay in contact while overseas.Amanda
“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”Thanks everyone for their great support and stories. It’s marvellous to hear successful property investors all doing different things and all making a go of it. You all sound very busy, although that reno work sounds very difficult….back breaking and dirty work. We’ve only ever done it once for a residential place….after the tenants trashed it again – I gave it up as too hard. I admire your tenacity and grit in doing such work. Hope it pays off for you all.
I am currently enjoying watching my latest industrial tenant do the reno for me, at his cost. He’s already poured 37K into the renovations since moving in on March the 1st….(new driveway, new hardstand on the laydown areas – looks beaut – raised the roof of the shed from 3.5m to 7m, replaced big roller doors and repainted the entire 6 buildings, took over the security fence payments and is kicking out the last of the dregs of tenants I inherited last year…..trucks and forklifts are marvellous things for this – far better than reams of letters from tribunals and lawyers….thank the Lord I’m not hamstrung by the RTA) and has another 110K to go over the next 3 months before he is fully up and running. He’ll get the benefit out of the improvements over the next 15 years I suppose….so this time I am positive the tenant won’t trash the place, as they did it. Do you reckon ressy tenants would be as obliging ??
I had to laugh but Abby and Amanda, there seems to be a common thread amongst all of this that we are doing. The really good deals that involve making returns usually a tad above average, always involve cleaning up some filthy mess that another human being was responsible for. Whether it be cleaning out mice infested homes, filling in cracked walls, picking up 80 tonnes of industrial refuse, or scrubbing showers that are blackened with grime. Would you agree ??
The winners seem to pick up rubbish. The losers seem to make it and then wallow in it. Fortunately for us, one of our tenants is a skip bin company, so I’m getting reasonable deals on 6 and 10 cubic metre bins…..he’s gotta keep the landlord happy. [biggrin]
On the deal I listed above, we have simply put the offer in, the Vendor has not accepted it yet – the company would be mad to if they do accept – but anyway….we’ll see. Of course, our Bank hasn’t approved the deal either….and seeing as though it’ll be 100% of their money, I suppose we need their nod as well.
Would be great to hear other people’s “next fling”…..
hi dazzling
new I would here from you again,
good to hear, well done and hope it goes well.
I am on target with mine,one in the bag lend going thru 80% gross realisation lend 10% rate 7 town houses looking at sand with a mariner up the rd and working on a berth.
second is in and working on getting it out of lenders mine don’t have any rubbish just lots around my desk.
hope you get your deal and it works out ok looks like I won’t be getting over there in the near future for that scotch.
great to hear you are out there putting deals together and if you are over this neck of the woods give me a call.here to help
If you want to get involved in some of the projects I’m involved in email to [email protected]Well the Vendor is supposed to give their decision on our Offer tomorrow. Apparently we have some stiff competition from an Eastern States institutional fund, but they are playing big boys ‘hardball’ and their numbers are lower than ours and trying to crunch the Vendor using their considerable leverage.
Hopefully the Vendors see reason and take our slightly higher (but still low) offer.
I’m sweating over here in the Middle East, completely removed from the action, other than email. The wife is handling the lot on behalf of the JVP.
If successful, I’ll be doing cartwheels down the office hallway over here.
If we get it, then drinks are on me…..I know Grossy likes a Scotch and Simon knocks a beer or two back….what does everyone fancy ?? [lmao]
While you’re up, I’ll have the same as Simon thanks Dazz.
Good Luck.Mal
Getting out of your comfort zone, can help you become comfortable
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