So, have you bought additional investment properties this year?
- Thread starter HandyAndy888
- Start date
is this all classes of comm property in all states? why do you say so?
What if you have a secure lease with a secure tenant? Still a no go? Me thinks not.
Good strategy. We haven't had a fall in commercial property here in Victoria for a long time. I can't wait for that day. I don't like paying 5% cap rate for a commercial shop with limited upside.
Joe
Are you looking at high end property?
Not everything is overpriced, it depends on where you buy.
I haven't bought anything else so far because I was waiting for 2 of my IP's to settle but I'm now ready to buy and currently looking
25% falls in some markets where demand is dead and gone is possible
but in most markets such drop is unimaginable because there is no significant downwards pressure for prices to fall by much.
Don't try to compare us with countries which are almost bankrupt or where people haven't got jobs and therefore can't get finance.
Therefore, if you are waiting for such large price falls for example in Sydney,
there is a high probability that you'll stay out of this market forever.
IMHO
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Top topic Andy,
an interesting topic, Yer bough a cracker in Toowoomba, a strata titled 4plex on 2000m 1k from uni, just started working with TWBA council for another 4 units down the back. I was here for the floods, then was doing some contract work on Lizard island off Cairns, When Yasi hit, So yer Andy I also felt like I was getting chased. the market is definitely down, settled/sold 1 last week a unit, but struggling 2 offload another 2 on the market units, as for high end, its terrible, my next door neighbour dropped his house by 10% 50k. As for business, same goes limited work around, its going to be an interesting year, this one.Even if the market is terrible, I can't wait, get way to board and depressed sitting on the bench. Just have to make sure your getting a bargain, and the project is going to be worth it.
If you dont mind me asking, how do you go about buying a business for instant cashflow. This is something id like to look into in the near future, as im happy at my job, and would like to invest my savings into something over the next year or two.
Is there a field you specialise in, or do you just buy into something that has good returns, and get someone to manage it for you?
Buying a business might be ok but nowadays they seem to go for ridiculous valuations because there's lot of foreigners buying local businesses for their permanent residency. Definitely not a good move in Victoria. I had a friend who recently sold a small business for about $500k, it loses money and it only has a 2 year lease left...go figure
The business has to be profitable, established, and with loong leases if you are looking to buy one. At least 15 years on the lease - 5 x 5 x 5 or see ya.
The amount of profitability and buying price range is all up to you in your current finanacial circumstances. Keep in mind that all business owners will try to make the figures look at good as they can for a sale.
The business I bought is not in my field of expertise whatsoever, so it had to be profitable enough that I could employ a manager and pay him well enough for him to want to stay longer term, and still have enough meat in it to pay myself a dent wage. Sounds easy, but this is one of the variables you need to consider if you go down this road.
Generally, there won't be enough profit in a bsuiness to do this if it is under $400k I'd say.
Or, pick a field in which you have some knowledge and then work it yourself and make more money for yourself. The problem here is you may end up doing a zillion hours for only a normal wage. Been there and done that; no fun after a while.
As a guide, the purchase price of the business I bought was equivalent to 2 years nett profit after expenses, and this is the maximum I would ever consider paying for any business. Some will argue this is not going to happen in certain industries; they may be right, and I wouldn't buy into that industry - especially if you have to borrow the entire amount.
Given that in today's lending climate banks are not lending much on business - maybe 40% of purchase price if you are lucky, you would want to be buying the business at a very cheap price.
I looked at a business over 2 years ago (before I bought the workshop) which had decent figures, asking $450k plus stock. This was more than 2 x nett profit. I offered $300k - which was 2 years nett profit based on thier tax returns. The agent said I would probably get it for $350k. I said see ya.
The business is still for sale today, and they are asking $390k. later this year after our PPoR is finished and we get a reval to see where we are really at, I'll be going back to this guy with an offer of $250k. He'll say no, most likely.
Given the current lending climate - and I'm tipping he has had little interest - and it's not going to get any easier to borrow in the near future; he might sell. If not, move on.
You will also need the advice of a good lawyer involved in business acquisitions for the first one. This will cost around $5-8k to get the protection you need throughout the process. I can PM you my guy's details if you ever need them.
Your friend must be a legend. I wish I was him
There is no rule of thumb. It depends on the size of the business, the stability of the business and the growth prospects.
Every time you buy Myer shares or David Jones shares or JB Hi-Fi shares you are paying the equivalent of 25.0x. But you wouldn't even pay 5.0x for a retail outlet around the corner that sells clothes.
Every time you buy Myer shares or David Jones shares or JB Hi-Fi shares you are paying the equivalent of 25.0x. But you wouldn't even pay 5.0x for a retail outlet around the corner that sells clothes.
Why not consider an online store rather than bricks and mortar.
Overheads are less.
Overheads are less.
Thank you for the in-depth reply Bayview, much appreciated.
Ive been looking every now and again at businesses for sale, and i cant believe how much some people are asking for some! Ive always been pretty clueless at how to value a business, or the assess how much i would offer one, so the 2x idea sounds like a good one.
Ideally, id love to go to my boss and say "if i gave you X amount, could i buy a share in the business", but when it turns over around $10m a year (would say 20% clear after all expenses), im sure what i can offer wouldnt be worth it haha.
Ive been looking every now and again at businesses for sale, and i cant believe how much some people are asking for some! Ive always been pretty clueless at how to value a business, or the assess how much i would offer one, so the 2x idea sounds like a good one.
Ideally, id love to go to my boss and say "if i gave you X amount, could i buy a share in the business", but when it turns over around $10m a year (would say 20% clear after all expenses), im sure what i can offer wouldnt be worth it haha.
Give it a go. The worst thing he/she will say is no.
If you don't ask you don't get.
One of my mates manages a golf proshop facility which recently changed ownership
He asked for a 5% stake in the ownership from the new owner. The new owner wanted him to go up to 10%, but it was too much of a stretch for him, so they settled on 8%. It was a figure of $750k to buy in, so he gets his % of dividends plus his management income.
$750k for a 8% share makes the proshop worth supposedly 9.3 million dollars. He did do his due diligence???
The share was a share of the ownership of the whole golf course facility.
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