Investment Opportunity

[garner946]

Hello all,

At the risk of being flamed, I thought I'd place a post in this forum inviting people to participate in a syndicate that I'm involved with. This won't be for everyone, and I'm suggesting that you do your own research if even remotely interested. There have been posts in this forum before about mezzanine finance, and this is along the same lines.

I’m not going to provide full due diligence information about locations and numbers at this stage, only to say that I will provide them if you respond privately ([email protected]). Main reason being is that it’s too lengthy to go in to here in the posts, and there is information we only want to provide to investors or strong prospective investors.

Essentially we (being my business partner and I) have a number of projects that have either settled, are under contract or about to go under contract. These range from single story houses that are in need of a renovation up to a 32 unit development site. Our company are not builders, we see our role as deal putter togetherers(!) By bringing together the property, the finance, the real estate agent, etc, we believe there is a $ in it for everyone.

We make our money through a project management fee and through the returns from our own money invested in the projects (which we have in every deal). For the last 6 years we have been putting together deals individually and in small syndicates and not once have we lost money on a project. Some have been much better than others, but our track record is pretty good. (Again details can be provided)

Properties currently requiring mezzanine funds include an 11 unit development in a bay side suburb of Melbourne and the 32 unit development (mentioned above) on the central QLD coast. Basically this finance makes up the difference between our own funds and what the banks give us. On some deals it can be secured against the property in question, and in some other deals it can’t be, depending on the senior finance conditions. (Although a caveat over the property is always available)

History shows that returns to these investors are between 8%pa and 64%pa where some deals are done over a number of years, and some much shorter time. (Some never even settled!) We don’t offer a guaranteed return because we think that limits the upside, and if investors are in for a number of deals then usually the higher paying ones outnumber the lower paying ones.

A question that has been asked in this forum before is – why would developers use expensive finance? Well the answer to that is pretty straight forward – firstly it’s better to have a lesser amount of something than nothing of nothing. If it weren’t for our investors then we wouldn’t have grown as to the considerable sized projects that we are doing now, but for that privilege we have had to share the profits, and we actually enjoy doing that. Second reason is, that it is actually cheap finance. If we are paying (say 15%) for funds then the use of that money is better than not being able to do the deal at all. Thirdly (as mentioned by Sean in this forum) the ability to multiple deals at one time keeps the cash flow going for investors and ourselves.

Again, this is not for everyone, and when putting something out there like this, (and I know you haven’t heard of me before) I’ll probably come under a bit of criticism. However we genuinely believe that by being involved in a small group like this, that investors can gain more than good returns on their money. Including education, knowledge, and time with likeminded people who actually enjoy working for a living on projects like this.

I’m happy to reply to posts to this thread, otherwise feel free to email me privately. [email protected]

Regards,

Dave.

 

[Les]

G'day Dave,

Thank you for posting - obviously you've read the rules (if not, I would have expected far LESS information than what you have provided).

This deal is certainly a little "out of the ordinary", but none-the-less appears to me to fulfil the requirements of the listed rules.

You already seem to expect there will be lots of questions - as per rule 3. And, as I said earlier, you have included a worthy amount of info about "the deal" - thus fulfilling reuirements of rule 6 even tho the wording of that rule does not directly apply to your offer.

3. Keep in mind that the reason for this forum's existence is EDUCATION, and not merely a bulletin board of properties for sale. Understand, by posting here, your post will likely be questioned by all and sundry, and you will be called upon to substantiate, in detail, why your deal is worthy of consideration as a good deal. So, when posting, tell us up front, and in detail, WHY this is a good deal (also refer Rule 6)


6. Ensure your post has sufficient information to justify why a property investor should consider it. Comparative information, extensive demographic detail, financial details, etc. are a MINIMUM if you want your post to be taken seriously.

Over to the readers to consider the merits of your offer, and to ask questions related.


I would like to remind readers to consult the rules relating to "responding to postings" - in one phrase, "Ask, but be nice about it !!"

Regards,

 

[garner946]

Hi Les,

Thanks for your feedback. Compared to some posts, I think we're off to a good start!

I can certainly provide some financials and details, but the entire excel workbooks would be a little much at this stage.

The 2 deals I mentioned in my posts stand like this (there are others, however these 2 are the biggest (and probably longest))

QLD deal.
Purchase price $1.3m
Build price $8m
Extras $2m
Sales Revenue $16m
Settlement in October.

We've nearly filled the mezzanine side of this deal from our normal investors. So won't be around for much longer. I think we've got another $100,000 or so to raise.

VIC deal.
Purchase price $2.1m
Build price $1.7m
Extras $1m
Sales Revenue $5.2m
Settlement in August.

Again, we have a number of investors already in this one, but still around $300,000 to raise.

In relation to why these are good deals (in general) the QLD one is in on one of THE hottest areas in Australia right now. People are clammering over real estate there, literally, and prices are going up every day.

On the other hand the bayside one is in a VERY established suburb, where owner occupiers and investors alike are prepared to pay top $ to be in one of the best streets in one of the best suburbs. And by building a product that is sensitive to town planning issues and our target market, we can be very sure of a safe return.

I forgot to mention in the original post that we have a trust struture for all investors (and us) to be protected under. The returns are paid where there if there is greater than 15% return, then the portion above 15% is split between the investors and the project managers 50/50 so everyone wins.

Regards,

Dave.

 

[Sim]

I get concerned with people asking me to consider investing with them when they only supply a free hotmail account for contact. Any particular reason you don't have real email ?

And what is the name of your company ?

 

[Jamie]

Hi Dave,

Just a couple of quick questions I hope you can help us with...

At the risk of being flamed, I thought I'd place a post in this forum inviting people to participate in a syndicate that I'm involved with

Firstly, are you "involved" with the syndicate, or do you in fact "control" it? It may seem like a small distinction, but from your original introduction, you make it seem like an investment among equals (or an investment "club"), but later in your post you mention it is only you and youre partner. Do investors have any say in the dispersion of their funds?

Essentially we (being my business partner and I) have a number of projects

Can you elaborate on yourself and your partners investment history?

Are you involved in any current projects we may be aware of?

Do you operate under a company structure?

Do you have an ABN which we can check with industry contacts for references? With ASIC?

Basically this finance makes up the difference between our own funds and what the banks give us. On some deals it can be secured against the property in question, and in some other deals it can’t be, depending on the senior finance conditions

With respect to the deals in which the finance is not secured against the property, WHAT SECURITY IS OFFERED? Do you and your partner provide it, or is the investor required to provide it?

We don’t offer a guaranteed return because we think that limits the upside,

Can you guarantee a minimum return? If so, what is it? Secured by what? If not, why not?

Just a couple of questions I hope you can help us with.

Jamie

 

[Mike]

Hi Dave,

Thanks for a couple of interesting posts and I hope you don't get flamed as you have provided a fair amount of detail without the usual sales hype.

One issue of concern which Sim and Jamie flagged is the credibility of the poster. Some members of our forum have been posting for years and have a lot of credibility as a result. It is easier to trust people you know than you don't know.

However, many deals posted on Caveat Emptor in the past have been by people we've never heard of. One of the reasons some of those people have been flamed is because they lack credibility and moreover they don't appear to regard that as an important issue for us.

I don't expect you to hang around on the forum for a number of years to get the necessary credibilty but you need to address the issue someway nonetheless. Are you setup as a legitimate business? Will you provide contact details of your other investors to get testimonials? If we wish, can we meet with your solicitor and accountant to verify the deals you have done in the past?

On a personal note, do you have any professional qualifications? Registered with any professional organisation? Anything else to add of relevance to your credibility?

Regards, Mike

 

[garner946]

thanks for your interest at least in requesting some more info.

I'll do my best to answer your questions...

Firstly, are you "involved" with the syndicate, or do you in fact "control" it? It may seem like a small distinction, but from your original introduction, you make it seem like an investment among equals (or an investment "club"), but later in your post you mention it is only you and youre partner. Do investors have any say in the dispersion of their funds?

Well, I control it from the sense that I am a founding director and shareholder. Investors can choose which project they want to become involved in. Usually it works where we purchase something, talk to our previous investors, ask if they want to be involved, and it goes from there...

Can you elaborate on yourself and your partners investment history?

Sure thing. Happy to.
As stated, I started off pretty small buying 1 or 2 bedders, doing a reno, renting them for 12 months and then selling.
2 recent ones have been
175 purchase, 25 reno and 260 sale price.
245 purchase, 25 reno and 320 sale price.

I then moved on to whole lots with subdivision.
380 purchase, added 1 strata title apartment and reno existing house for 300, end value was 900.

We've raised houses, dropped houses, extended, etc also.

There were others interspersed and some current holdings.

Are you involved in any current projects we may be aware of?

Privately, I'm doing some land in QLD, and office in QLD, a loft apartment in VIC, a warehouse conv. in VIC. None that you'd be aware of I wouldn't think.

Do you operate under a company structure?

Always, and usually a trust sitting under that for flexibility.

Do you have an ABN which we can check with industry contacts for references? With ASIC?

Not sure which one to give you as usually when completing a deal the company gets wound up. The way all this started is that I'm involved with a buyers advocacy called inProfusion (www.inprofusion.com.au) (new website coming V. soon btw) and being a buyers advocate, you come across deals all the time. I don't have the capacity to do all of them all of the time, so we spoke to some clients and syndictaed some funds, and put together a deal. It's gone from there. inProfusion's ABN is 56 098 065 108

With respect to the deals in which the finance is not secured against the property, WHAT SECURITY IS OFFERED? Do you and your partner provide it, or is the investor required to provide it?

A caveat can be provided over the property. Usually the directors of the company involved with the deal provide guarantees on the finance. As I think I said before, the ideal scenario is a second mortgage, but sometimes the bank has that.

Can you guarantee a minimum return? If so, what is it? Secured by what? If not, why not?

Any guarantee would be entirely deal dependant. To date we haven't because our investors have been happy with the returns achieved. I understand where you're coming from, but I can't see where I could secure your guranteed return. Because most of our deals are buy, develop/renovate, sell and not buy, hold and lease it's pretty tricky.

I get concerned with people asking me to consider investing with them when they only supply a free hotmail account for contact. Any particular reason you don't have real email ?

No Sim, no real reason, although I noticed the amount of flaming going on in some posts, and decided I didn't want to be inundated just in case. anyway you can get me at [email protected]

Will you provide contact details of your other investors to get testimonials?

Sure, obviously by prior and private arrangement.

If we wish, can we meet with your solicitor and accountant to verify the deals you have done in the past?

I'm sure they'd be happy to. Same condition as above.

On a personal note, do you have any professional qualifications?

Just a bachelor of Information technology! Don't think that's relevant. Oh and an agents representative's license.

Registered with any professional organisation?

No we're not builders per se, so nothing like that.

 

[Sim]

Thanks for the info Dave.

 

[Jamie]

Thanks Dave, that cleared up a lot of things

 

[investor]

Originally posted by garner946

VIC deal.
Purchase price $2.1m
Build price $1.7m
Extras $1m
Sales Revenue $5.2m
Settlement in August.
Dave.

Hi

hmmm let me do the sums here. Provided everything goes OK, we have 2.1M + 1.7M + 1M = 4.8M for sales of 5.2M

400K profit for a development of 4.8M doesn't seem much at all.

That's around 8.3% and if you cosider the time factor, it may take around 24 months to get approval from council and for construction to be completed and eventually sell the property.

This brings the return to around 4.1% per annum, which is quite abit less than just keeping your money in the bank at 4.75%.

Why go through the hassle of developing for such low returns ?

Just thought I'd mention that

Regards

Investor