Allocation of profit from developments

[LeoT]

For those of you who develop on here, when your doing say a commercial development of 10 town houses. With the cash from the stock you sell, do you just reinvest most of the equity for further developments or do you use some of the profit to also pay down debt? Just curious to get different points of view and ideas.

Thanks guys

 

[dog]

I think both is the way to go about it in my opinion.
Firstly you dont want to be stagnant and not move forwards with more developments, and lose drive or motivation.
Secondly you want to hold as many (in my opinion) of each development as possible, provided they allow a better cash flow/equity position, and provided they dont hold you back with borrowing power.
Best of luck mate.

 

[westminster]

For those of you who develop on here, when your doing say a commercial development of 10 town houses. With the cash from the stock you sell, do you just reinvest most of the equity for further developments or do you use some of the profit to also pay down debt? Just curious to get different points of view and ideas.

Thanks guys

No to paying down debt except where required by bank as I have sold their asset
Yes to reinvesting
+ give lots to ATO
+ use some as income

 

[LeoT]

Thanks Dog and WM for your feedback.

Risk wise/erring on some conservatism, I lean towards Dog's sentiments...

But logical/head wise/aggressive stance, I totally understand WM's position of not paying down debt. For the most part I have been quite aggressive in reinvesting as much as possible so far. I know everyone's goals will vary and that will dictate what options they take really.

hmm..thanks for your comments guys. Anyone else?

 

[westminster]

Thanks Dog and WM for your feedback.

Risk wise/erring on some conservatism, I lean towards Dog's sentiments...

But logical/head wise/aggressive stance, I totally understand WM's position of not paying down debt. For the most part I have been quite aggressive in reinvesting as much as possible so far. I know everyone's goals will vary and that will dictate what options they take really.

hmm..thanks for your comments guys. Anyone else?

I think it depends on where you are in the journey. Inevitably I will be paying down debt but not at the moment as I'm in an agressive stage

 

[LeoT]

I think it depends on where you are in the journey. Inevitably I will be paying down debt but not at the moment as I'm in an agressive stage

Yeah makes sense WM...i'm 32 now and I have been in the 'aggressive stage' really since 22...I find.. I just extend my goals making them bigger and bigger so ultimately my level of aggression doesn't go down. Do you mind telling me what age abouts you are wm?

Cheers

 

[Ace in the Hole]

We hold all developments, 13 townhouses so far over 3 developments, selling costs too much.
Simply re val on completion, draw funds and go again.
If we were to sell, I wouldn't pay down debt, just re-invest.

LeoT, would be great to catch up, are you in Sydney?

 

[westminster]

Yeah makes sense WM...i'm 32 now and I have been in the 'aggressive stage' really since 22...I find.. I just extend my goals making them bigger and bigger so ultimately my level of aggression doesn't go down. Do you mind telling me what age abouts you are wm?

Cheers

I'm 39 3/4

Like Ace has mentioned as well I don't sell much. So far only 1. I don't like giving the ATO chunks of cash

 

[LeoT]

We hold all developments, 13 townhouses so far over 3 developments, selling costs too much.
Simply re val on completion, draw funds and go again.
If we were to sell, I wouldn't pay down debt, just re-invest.

LeoT, would be great to catch up, are you in Sydney?

Fantastic accomplishment mate! That's exactly what we've been doing; develop, re val, draw allowable equity and reinvest.

hmm.. so im guessing you didn't have to have any pre-sales since you kept all stock? were they all on resi loans?

Where I live is a little everywhere really.. but yes, I tend to be in Sydney on average 6 months of the year give or take. Im not in syd atm but will be back in a few week. Would be great to catch up mate.

 

[LeoT]

I'm 39 3/4

Like Ace has mentioned as well I don't sell much. So far only 1. I don't like giving the ATO chunks of cash

haha I like the 3/4

Yeah I know it sucks giving a large chunk away to the ATO...one of the main benefits I saw from selling a few was that you could realise some of that great 'cash flow' now, rather than wait till the future. Yes, most developments should be cash flow positive..but that doesn't really amount to a large passive income..i guess depending on how many you have really.

 

[Ace in the Hole]

Fantastic accomplishment mate! That's exactly what we've been doing; develop, re val, draw allowable equity and reinvest.

hmm.. so im guessing you didn't have to have any pre-sales since you kept all stock? were they all on resi loans?

Where I live is a little everywhere really.. but yes, I tend to be in Sydney on average 6 months of the year give or take. Im not in syd atm but will be back in a few week. Would be great to catch up mate.

No pre-sales.
Have had a small resi loan for a duplex, commercial loan for 5 townhouses, (so frustrating and more expenses), and a private loan for latest 6 townhouse dev.
Try to pay cash as deep into the development as possible, business profits provide the cash as the development progresses.
Last one needed a 350k private loan at really high rates to finish it off, as we finished before our business could make enough profit, did everything possible to avoid it but exhausted all avenues. Banks would not look at it even though our lend was only 650k, (initial property purchase loan), on a 3.5 mil project.

Self funding is the best IMO, if you have a good income source.

 

[LeoT]

No pre-sales.
Have had a small resi loan for a duplex, commercial loan for 5 townhouses, (so frustrating and more expenses), and a private loan for latest 6 townhouse dev.
For the 5 TH how did you avoid pre-sales?

Try to pay cash as deep into the development as possible, business profits provide the cash as the development progresses.
Last one needed a 350k private loan at really high rates to finish it off, as we finished before our business could make enough profit, did everything possible to avoid it but exhausted all avenues. Banks would not look at it even though our lend was only 650k, (initial property purchase loan), on a 3.5 mil project.

Self funding is the best IMO, if you have a good income source.

yeah just reading that I could feel the pressure re private loan of 350 because business profit couldn't quite cover it. But sounds like you worked through all the finance challenges well considering!!

I always feel every development I've done is like a roller-coaster ride of highs and lows. SUCH a good feeling though isn't it..when it all comes together and all that haaaard work pays off!

Question: Do you also find that council are always a challenge..? Never ever just had a smooth ride with them? I certainly haven't had a smooth ride on any one of them... to be honest I don't have much regard for councils (hush hush of course). I find they range from plain lazy to incompetent...Is it just me..?