Something Different

[gecho1]

Hi all,
I am in the process of moving from contractor to reg builder, after having been (Almost) wiped out by a company (Thats another story)
Essentially it means starting again, - so

I am currently seeking a JV of sorts and would like to know if this scenario could work and what LVR would be required to intrest an investor.

The idea is to purchase a house in both names with me moving into the house for one year. During that year payments are made in the form of rent (Would cover the return of an interest only loan). Within 1 year renovate the property on a part time basis, (Easy being in the trade) and look at selling after 1 year.

The profit is then split at a rate of say 20-80.

This would leave the investor with a decent ROI during the year, and an additional bonus at the end (Potentially)

What sort of things would i have to look out for in this scenario?
Is 20-80 split fair to both parties?
Has anyone put a deal like this together before, and if so how did it go?

cheers all for your time

Ade

 

[alexlee]

I'm assuming you get the 80.

Depends how much value you can add. If I was the investor and considering your proposal, I would want a few examples. Do a few of these and prove to me how much value you can add. That 20 had better be enough for me to take all the other risks, such as:

What are you risking? Sounds like you get a place to live in while I take the risks with the loan. Are you putting up half the money for the property? If not, what assurance would I have that you don't just stop work on the property? If it's in both names I can't just sell it without your approval. I would want, at least, an option to sell my half to you at a pre-determined price.

Are you willing to pay me the 7.5% interest that I would have to pay in the form of rent?

I'm just thinking, that's a big cashflow drain. If you can afford to pay me 7.5%+ interest for my loans, why don't you just buy the place yourself and renovate it?
Alex

 

[kph]

Something more different ...

We are in the process of building up a number of building companies that require a registered builder to assign their licence to the building company.

No need to invest any capital and no JV requirements, and passive income on a fee basis per build.
Target per builder is min 40 houses per year.
4 to 5 building companies are planned.
Only problem is that we only operate in WA atm.

 

[gecho1]

Cheers Alexlee,
If i was in a position to approach a bank at the moment i would, however due to having to pick up the peices from scratch i was looking at alternative methods of finance.
This deal would more suit an accountant or other proffessional with a client who wishes to invest short term, as opposed to a JV where the investor has to borrow the funds.

I do know of private equity being available, it is a matter of presenting a deal worth considering.

As for how much equity i can build into a property-"How long is a piece of string", Having done many 100s of reno's in the past, i do have a small idea on what to do and how to build equity very cost effectively.

You would need 1 year as the first 6 months is establishing the gardens and getting a feel for the place. The next 6 months is a concerted effort to begin your reno's.

I know what some of you are thinking, "What's he going to get done in 6 months part time!"

The answer is heaps, when you have the tools, knowledge and resources to accumulate cheap building materials, you would be surprised how quickly things move

As far as risk of myself not touching the property. That is a risk, too true, but then that would apply if i were sitting down watching Big Brother, or idol or whatever is on a sunday night, as opposed to educating myself on all things "Property Investment" related.

cheers

Ade

 

[gecho1]

KPH,
Good luck with that.
I know from experience that it is getting harder and harder to get licensed, and i don't know of any builder who would assign their number to a company, without retainng some semblance of control of said company. I do know builders who have assigned their numbers in the commercial field, however there was a great deal of trust and history between both parties.

That said i am curious as you must have more to this and I would like to know more. PM me and we can chat

cheers
Ade

 

[JoannaK]

why don't you look at having someone "wrap" the house to you?

 

[gecho1]

hey Joanna,

Thanks for the reply. I had thought about it but feared the repayments may not allow me to purchase materials.

What sort of repayments would you be looking at on a 350k loan?
The area i am interested in averages this price for an un-renoed house through to 490k for new homes on postage stamp blocks

any info would be appreciated

cheers
Ade

 

[gecho1]

I'm just thinking, that's a big cashflow drain. If you can afford to pay me 7.5%+ interest for my loans, why don't you just buy the place yourself and renovate it?
Alex

As i said previously, although i have great cashflow, i no longer qualify for a loan. Self employed and had numerous workers i still had to pay. Although I am holding above water it will be some time before i look attractive to a lending institution, which is the reason behind a more concerted effort to get creative in financing the next project.

This doesn't have to appeal to everybody. Just somebody who may be interested on how to reno fast and cheap- eg fully outfitted kitchen and bathroom for under 10k in under 1 week. And no i'm not talking a cheap slap in kitchen or bathroom

Ade

 

[Bandita]

Hi gecho,

Seems a bit risky from the Investor side to only get 20% of the gain (unless it's 80/20 towards the investor?) - who would be paying for the reno?

Cheers,
Jen

 

[gecho1]

Hey Jen,
I would be paying for the lot.
This would not necessarily suit an investor who needs to borrow in order to fund the project, but rather an investor or company who needs to park their profit for a year, perhaps a tax offset or the like. So essentialy they would recieve ongoing repayments on their investment, plus a share of the profits after sale. I am intending to sell the first few, with the option for the financier to roll into the next project if they need/wish. They would always have first option

 

[sunshine]

Hi gecko1

Where would this particular prop have to be situated? Would you look at NSW for a short term?

Sunshine

 

[tribe]

Let me get this straight,

1) Investor finances the loan
2) You pay the intrest as rent
3) You do the renno
4) The house is sold the investor gets 20 of the profit.

No outlay except the stampduty deposit etc?

 

[gecho1]

Hey guys,
Sunshine, the property would have to be in Brisbane as it would be too hard to relocate my family and business.

Tribe- Thats about the extent of it. No further outlay, as materials and labour for the job would be sourced from my own business.

 

[sunshine]

Thats a bummer, I have recently settled on an IP which needs a reno and can be subdivided. Coulda been an opportunity.

Sunshine

 

[gecho1]

no worries Sunshine, maybe next time, if you ever need a reno done QUICK and like to turn them over fast let me know