Young man seeking mentor

Sebastian,

I've also recently joined the property options game, and I'm at a similar stage to you.

So far I've made the following observations:

***It seems that we need to find "motivated sellers" for the strategy to work. In the words of someone over at Somersoft forum, a motivated seller is "someone who doesn't know what he's got."  If sellers did know the (potential) value of what they've got, why would they sell to us at way below market price, when for a paltry investment in strata-titling, subdivision, or Development Application, they could cut us out completely and sell directly to the people who buy from us?

To further highlight this point, take a look at the explanation of the options process on Mark Rolton's site:

http://propertyoptions.com.au/Home/How-It-Works.aspx

There we see our option holder netting a $700K profit for the meagre task of achieving approval on a DA. This raises several questions:

*Why doesn't Seller wake up to what's going on, arrange the DA himself and go straight to Massland, or some other buyer? Is it because Seller's desperation blinds him to the opportunities?

*Why does Massland see fit to pay Option-holder $700K for only some pretty basic legwork? For that money they could hire someone fulltime for 7 years who could surely source more deals for them more cheaply  than Optionholder?

*Buyer ends up paying $1.7M for the property. How much does his development cost and how much does he sell it for?

*If the astounding testimonials on Mark's site are true, why isn't everyone out sourcing deals, and how long will it be before they are?

It's still early in the game so, leaving these questions unanswered for now, I present my understanding of the sequence of moves, as I imagine them to be:

**We see a block of land/property/whatever we like the look of;

**We find out its current market value by reviewing recent sales of similar properties in the area;

**Somehow we find out what sort of title the land is under – freehold, community, strata etc;

**we run a what-if scenario through our spreadsheet. Eg, what would it be worth if it had 4 townhouses on it, or it was subdivided, or it was strata-titled?

**Now we really like it and we want to contact the owner, who may or may not be wanting to sell.

**We draw up our option agreement, and practise how we're going to get the owner to understand it, if we ever get that far. Maybe something like, " I want to buy your land but I can't/prefer not to pay you for two years. Meanwhile here's $1000 to keep you from selling it to someone else," but sugar-coated.

**We need the owner's name. We can get this by paying a fee to some Government Department, but if we are investigating multiple properties, this could get expensive. We are not wanting to use any of our own money, especially when we don't know if the land is for sale.   A letter in the mailbox could be an option, but what if it's a vacant block with no mailbox?  Is there a way to find the names of land-owners for free?

**Somehow our letter reaches the owner. Assuming his reaction is more favorable than "O God no! Someone else wants to buy my land. That's the 3rd one this week and it's only Tuesday, " we could be in with a chance.  Many people have indicated that 95% of approaches fail because sellers/owners don't want to know about options.  That still leaves 5%, which is a lot of properties.

**We get lucky, and seller agrees to our offer.  We implement whatever plans we had for the property then sell or hold it to realise or accrue our profit.

***Rinse and repeat.

Insert a "wrong" after far

Cheers

Jamie