Melanie McDonald's 7 lessons for success

[Ausprop]

great story Melanie. I have had similar ideas about comm property but when i sit down with a blank piece of paper and decide what business to start I have overload. how do you actually pick one out?

 

[SKM]

great story Melanie. I have had similar ideas about comm property but when i sit down with a blank piece of paper and decide what business to start I have overload. how do you actually pick one out?

Hmm the answer to that is probably more than a paragraph and probably not property related but I'll try to give you the readers digest version of some of the criteria that I use:
-I buy rather than start, am looking for something that might not be profitable in the current structure but already has a strong customer base- an invention without any current customers is not yet a business. The number of times agents say `it just needs a bit of marketing' amazes me. It's like taking a bare block and planning to live there with `it just needs a bit of building'. Yeah -like -it isn't actually there?
-I buy businesses that are not location dependent, ie not retail or hospitality (both of which strike me as too much work for too little return anyway). That way when I find a suitable vacant property I can put them in there as the tenant without losing customers in the move. A couple of examples are a professional services business which I moved all over the place, every time I found a place I moved them in and then when I found a permanent tenant I moved them out again! And an engineering (pressed metal and other blokey stuff) business which supplied to distributors and wholesalers not retail customers where I bought a factory and moved them in.
-And maybe the next most important thing is I buy things I have some related experience in. For example I bought a beauty college having run a management training business (turned out to be more different than I thought) and for the engineering business I had been in management in fairly heavy industrial manufacturing. Until I had the experience I have now in business turnaround I would stay away from unfamiliar industries.
-And don't expect it to be some easy `cashflow machine'. Running a business is hard work and I get really frustrated with the gurus who say `oh just buy 10 and have them managed'. Yeah right.

Hope that helps, and hope my time here doesn't end today by getting kicked out by the moderators for talking about something other than property

Cheers,
Melanie

 

[WinstonWolfe]

And don't expect it to be some easy `cashflow machine'. Running a business is hard work and I get really frustrated with the gurus who say `oh just buy 10 and have them managed'. Yeah right.

Melanie

I get that Melanie Kiwisaki.

1.
I particularly like the mobile company thang. that's quite cool. and something I hadn't considered personally.

I see one advantage is that lenders would be happier to lend if you are carting around your own established cash flow co. I suppose too, once the lender has lent, you can pack up your lot, and rack off and rent the shed to some higher risk mob the bank might have been more suss about.
Is that how it works?.....does a lender have recourse if the lessor and lessee mutually terminate a lease that a commercial loan was heavily influenced by?

2.
Another question pleazey....do you ever consider the macro climate when buying businesses and buildings...for instance, do you try to hedge bullish exposure with bearish, to reduce the risk associated with tenants and cash flows.

What I am getting at is, we have stuff in the bush in the mining services sector. But I'd like to offset that with something more recession resistant, say like, a medical centre, or the 21st Century equivalent of a caravan park (boutique over 55s retirement enclave).

Or do you just go where the wind and your experience blows, without too much high level second guessing of xyz?

3.
Final question.
What's your general economic outlook for Australia in the next 3-5 years?
And what sectors do you think capital might be more judiciously allocated to, all other factors (like experience) being equal? (yes, I am the efficient allocation guy )

edit:
I've been driving around Hendra, Northgate, Banyo industrial parks over the last 12 mths, and have the impression there's a lot of for lease/sale....a sign of the two speed economy?

Re a med centre, I have my eyes on a building in Toowong that could be easily sub let to allied health pros.

 

[SKM]

I get that Melanie Kiwisaki.

1.
I particularly like the mobile company thang. that's quite cool. and something I hadn't considered personally.

I see one advantage is that lenders would be happier to lend if you are carting around your own established cash flow co. I suppose too, once the lender has lent, you can pack up your lot, and rack off and rent the shed to some higher risk mob the bank might have been more suss about.
Is that how it works?.....does a lender have recourse if the lessor and lessee mutually terminate a lease that a commercial loan was heavily influenced by?

Yes the lender does have recourse. They have to consent to the registration of the lease so they will find out. Plus you agree to advise them of any info that will affect the security so changing tenant would fall into that category.
However usually they will consider an arms length tenant to be less risky than an owner occupier so they are usually quite happy if you move out. Gives them two organisations they can get payments from instead of just one. And for that same reason you usually get a slight increase in valuation when you stop being an owner occupier (all other things being equal).

2.
Another question pleazey....do you ever consider the macro climate when buying businesses and buildings...for instance, do you try to hedge bullish exposure with bearish, to reduce the risk associated with tenants and cash flows.

What I am getting at is, we have stuff in the bush in the mining services sector. But I'd like to offset that with something more recession resistant, say like, a medical centre, or the 21st Century equivalent of a caravan park (boutique over 55s retirement enclave).

Or do you just go where the wind and your experience blows, without too much high level second guessing of xyz?

A bit of both I guess. Apparently I am a `counter-cyclical investor'. I hear that's what they call it when you get excited when the market is quiet and nobody else wants what you are buying. Having said that I buy what other people don't want only if I am confident that one day they will want it again- so no high risk stuff for me.

3.
Final question.
What's your general economic outlook for Australia in the next 3-5 years?
And what sectors do you think capital might be more judiciously allocated to, all other factors (like experience) being equal? (yes, I am the efficient allocation guy )

Might have to efficiently allocate some capital to a crystal ball to answer that one. I have a `Melanie economic outlook' -am not really up to deciding what the rest of the country is going to do. I think it will be `interesting' by that I mean I think there will still be opportunities (ref: countercyclical).

edit:
I've been driving around Hendra, Northgate, Banyo industrial parks over the last 12 mths, and have the impression there's a lot of for lease/sale....a sign of the two speed economy?

Yes absolutely. I love sale/lease signs- says `opportunity for an option here' to me. I think there are so many economies within economies, I spend time with people who are in Melbourne residential and you would think they are from another planet to my Brisbane office commercial world where I have been living. I phoned most of the main commercial valuers in Brisbane last week and the consensus from all of them is that the worst is yet to come in commercial. Although one of them did say 'that means there will probably be a boom very soon as we are always completely wrong".

Re a med centre, I have my eyes on a building in Toowong that could be easily sub let to allied health pros.

I had a building with an alllied health business in it once- boy they were trouble . Have probably been looking at the same building as you in Toowong- did it go to auction a week or two ago?

 

[Ausprop]

very inspiring

 

[WinstonWolfe]

I had a building with an alllied health business in it once- boy they were trouble .

The story I got was they were having trouble with their tenant

Thanks for the info above. That's all good quality stuff it would take a long time to find out myself.

If your Toowong place wasn't 400m2, and abutting a french patisserie, then, no.

 

[SKM]

You're welcome.
Gotta go now there's a seat with my name on it on a Thai airways plane waiting for me. Might do some blogging from some airports over the next few weeks or while waiting for my scuba diving ears to unblock.
Thanks for having me to visit!
Seeya,
Melanie