Tempting to sell....but
- Thread starter Dazz
- Start date
From your first post the figures you mentioned are your view on the purchase price, my interpretation was an active imagination
I really don't think you can consider a sale until the tenant quantifies it. There is no such thing as an opened ended offer as at some point it does not make sense - purchase costs versus lease costs.
How much authority does the CFO really have? or is he just running of at the mouth. I have seen heaps of employees run of at the mouth without any real authority.
I would have thought that selling at a massive profit could have fitted into your strategy allowing you to reduce LVR substantially and bring forward your plans of retiring. With a reduced LVR you may even be able to live of the rents rather than your planned LOE which in the current financial climate may have to be reassessed by all those using this strategy.
In the end it is a personal decision as everybody as different levels risk and this decision will impact those leves of risk.
Cheers
I really don't think you can consider a sale until the tenant quantifies it. There is no such thing as an opened ended offer as at some point it does not make sense - purchase costs versus lease costs.
How much authority does the CFO really have? or is he just running of at the mouth. I have seen heaps of employees run of at the mouth without any real authority.
I would have thought that selling at a massive profit could have fitted into your strategy allowing you to reduce LVR substantially and bring forward your plans of retiring. With a reduced LVR you may even be able to live of the rents rather than your planned LOE which in the current financial climate may have to be reassessed by all those using this strategy.
In the end it is a personal decision as everybody as different levels risk and this decision will impact those leves of risk.
Cheers
I'll go against the crowd Daz and say don't sell.
Assuming you don't get put under too much strain by holding it for the next 6 months until your other properties rent kicks in to help with the cashflow - in my opinion there is only one direction the shed's price is heading.
If you can get a significant enough premium to market value now that would incorporate the projected growth for the next year or two it may be different as you could invest the money elsewhere.
From my VERY limited knowledge of the local industrial/commercial market (read: I imagine you know much more about it than me mate), vacancies seem to be popping up a bit more, but as you said - the tenant doesn't really have much of a choice on location does he?
I've sent you a PM mate...
Assuming you don't get put under too much strain by holding it for the next 6 months until your other properties rent kicks in to help with the cashflow - in my opinion there is only one direction the shed's price is heading.
If you can get a significant enough premium to market value now that would incorporate the projected growth for the next year or two it may be different as you could invest the money elsewhere.
From my VERY limited knowledge of the local industrial/commercial market (read: I imagine you know much more about it than me mate), vacancies seem to be popping up a bit more, but as you said - the tenant doesn't really have much of a choice on location does he?
I've sent you a PM mate...
Dazz, I would keep it. You've already part answered your question by relaying your mentor's advice.
You wouldn't have gone down this path if you weren't into taking some risks. The fact that you've got no normal stepping stone plan to your journey matters not.
I've read you posts over the past few months and the insight you have in this caper is often between the lines of your posts. Your intuition and gut drive you and that is your proxy plan. It is in the grey matter.....doesn't always have to be on paper or laminated on a wall.
You're forecasting being J.O.B.less next Feb anyway, due to your CBD rent review and you're clear with the banks for another year. The fact that a tenant loss would throw a spanner in the works is known to you and you've accepted that disomfort and its impact by the asset class you currently invest in.
That doesn't mean never sell.........the incentive for your tenant and specifically the CFO to have you out of the picture may get sweeter with time. Or as you're gut is telling you the multiples (of salary replacement) will get better tincture of time.
If you were into certainty you'd still be buying houses like most of us folk here. It's clear you've chosen a different road.
Good luck with your decision
You wouldn't have gone down this path if you weren't into taking some risks. The fact that you've got no normal stepping stone plan to your journey matters not.
I've read you posts over the past few months and the insight you have in this caper is often between the lines of your posts. Your intuition and gut drive you and that is your proxy plan. It is in the grey matter.....doesn't always have to be on paper or laminated on a wall.
You're forecasting being J.O.B.less next Feb anyway, due to your CBD rent review and you're clear with the banks for another year. The fact that a tenant loss would throw a spanner in the works is known to you and you've accepted that disomfort and its impact by the asset class you currently invest in.
That doesn't mean never sell.........the incentive for your tenant and specifically the CFO to have you out of the picture may get sweeter with time. Or as you're gut is telling you the multiples (of salary replacement) will get better tincture of time.
If you were into certainty you'd still be buying houses like most of us folk here. It's clear you've chosen a different road.
Good luck with your decision
Thanks Ben,
1. Cashflow would be the ideal - then I don't need to go cap in hand to the Lenders, especially in this environment where they say no before you've even asked the question.
2. 3 or 7 months - doesn't matter one bit. I've set myself up for 7.....which should be by CF by then.
3. No - it needs alot of feeding right now...but in Feb next year it won't.
From your first post the figures you mentioned are your view on the purchase price, my interpretation was an active imagination
Very true - nothing on paper....and we don't consider there is anything on paper until it's cash unconditional....so at this point she's situation normal. But if we decide to reply to their invite, it would start a process.
He's got enough authority to talk to me on behalf of the tenant - he is the designated financial contact for the LL. Does he have the authority to sign off on the sales contract - probably not....dunno for sure but.
From my VERY limited knowledge of the local industrial/commercial market (read: I imagine you know much more about it than me mate), vacancies seem to be popping up a bit more, but as you said - the tenant doesn't really have much of a choice on location does he?
Oh I dunno - you've actually walked around it and on it - something I haven't done as yet....
Thanks for the PM.
Daz
I remember well your "A man's gotta have a shed ..." thread - and all the blood, sweat and effort you and Mrs Daz went through over so many months before you bagged that monster - so my first reaction was to say "Don't sell!". But I can see the other side of the coin - many forumites have brought up a number of very thought-provoking points.
We, too, have never really set goals in concrete ..... it's been more like mapping a course, seeing what the weather brings during the journey and taking advantage of opportunities as and when they present themselves. So on this one, I reckon I'd have to go along with your old mentor when he said that if things get too confusing or overwhelming, then sometimes the 'do nothing' or 'wait and see' option turns out to be the best.
As several posters have said, you've already been there and done that - and very successfully, too - and you've learned a huge amount in the process, so if you had to do it again it would be a stroll in the park! I wish you all the best in your decision-making process!
Cheers
LynnH
I remember well your "A man's gotta have a shed ..." thread - and all the blood, sweat and effort you and Mrs Daz went through over so many months before you bagged that monster - so my first reaction was to say "Don't sell!". But I can see the other side of the coin - many forumites have brought up a number of very thought-provoking points.
We, too, have never really set goals in concrete ..... it's been more like mapping a course, seeing what the weather brings during the journey and taking advantage of opportunities as and when they present themselves. So on this one, I reckon I'd have to go along with your old mentor when he said that if things get too confusing or overwhelming, then sometimes the 'do nothing' or 'wait and see' option turns out to be the best.
As several posters have said, you've already been there and done that - and very successfully, too - and you've learned a huge amount in the process, so if you had to do it again it would be a stroll in the park! I wish you all the best in your decision-making process!
Cheers
LynnH
Hi Dazz,
If the chequebook is open then you could always calculate what you think it will be worth IF you are correct about its appreciation in the medium term future, and that could be your price.
Other than that, you have them locked in for another 8 or so years, which you were always going to weather, offer or not, with a bank guarantee and probably a rachet clause to keep you safe (not to mention market reviews, nil outgings for yourself to pay etc...)
You have done all the hard work to bring the deal together, I personally, would be very hesitant to hand that over to someone else on a platter without serious remuneration, especially someone who is not going anywhere soon.
Cheers,
Boods
If the chequebook is open then you could always calculate what you think it will be worth IF you are correct about its appreciation in the medium term future, and that could be your price.
Other than that, you have them locked in for another 8 or so years, which you were always going to weather, offer or not, with a bank guarantee and probably a rachet clause to keep you safe (not to mention market reviews, nil outgings for yourself to pay etc...)
You have done all the hard work to bring the deal together, I personally, would be very hesitant to hand that over to someone else on a platter without serious remuneration, especially someone who is not going anywhere soon.
Cheers,
Boods
Hunker down, sit and stay.
The CFO has basically offered you an open chequebook not because you are such a loveable rogue but because he can see property prices and rents only going in one direction (up).
Read the market signal he is sending you. If you can afford to hang on and ride it out you will not regret it.
The CFO has basically offered you an open chequebook not because you are such a loveable rogue but because he can see property prices and rents only going in one direction (up).
Read the market signal he is sending you. If you can afford to hang on and ride it out you will not regret it.
Dazz,
I will Never, Never Sell. That is, of course unless I have to.
If an opportunity presents itself that would replace my wages for the next twelve years, then yes, absolutely. I would have to sell.
Regards - Ben
I will Never, Never Sell. That is, of course unless I have to.
If an opportunity presents itself that would replace my wages for the next twelve years, then yes, absolutely. I would have to sell.
Regards - Ben
insuring against negative skew
Hard to say.
I'm also aware of all the reasons you should have goals and targets and mapped out plans, but am not doing great in that area.
I have a rough view of my wealth creation journey as a rainforest tree.. In the early stage you shoot up high and fast even with a single strategy ideally as you need to get to that sunlight. Later on you can spread out once you are on top of the canopy, at that point it's all about defusing all the potential negative scenarios you can dream up, instead of scrambling madly for the sun.
I agree with Keith generally on this matter, though don't know Dazz's details at all.
Tis indeed a good situation to be in.. I'm sure there must be a $ point where even the most die hard buy n holder will buckle.. Everybody gets one Alan Bond and channel 9 situation in their life perhaps.
Hard to say.
I'm also aware of all the reasons you should have goals and targets and mapped out plans, but am not doing great in that area.
I have a rough view of my wealth creation journey as a rainforest tree.. In the early stage you shoot up high and fast even with a single strategy ideally as you need to get to that sunlight. Later on you can spread out once you are on top of the canopy, at that point it's all about defusing all the potential negative scenarios you can dream up, instead of scrambling madly for the sun.
I agree with Keith generally on this matter, though don't know Dazz's details at all.
Tis indeed a good situation to be in.. I'm sure there must be a $ point where even the most die hard buy n holder will buckle.. Everybody gets one Alan Bond and channel 9 situation in their life perhaps.
Great analogy! I agree; I'm happy to be quite aggressive whilst accumulating, even if it's risky and not diversified. But once you've attained substantial wealth, it's natural that your risk profile will change, and diversification will become much more important.
Thanks for sharing, Andrew.
I hate the term open ended cheque book....suggest you find out as much about their cash flow, asset backing, and likely credit servicing capacity.
Bird in the hand
near money is dear money.......though where would you find a passive investment with as much upside if you sell?
Future Leverage
what's the future of credit? no one knows what's going to happen to interest rates or liquidity in Australia. whatever happens, it isn't likely to be as loose as it has been in the last 7 years. even if you get a big wad of cash, what's your credit limit going to be with reduced cash flows and reduced property for security? and what's the credit capacity of your tenant likely to be in 6 mths if rates move up or commercial credit criteria tighten.
Inflation
a big wad of cash might be nice earning 8% risk free....but remember to subtract whatever inflation really is and will be.
Expectancy calc
= P(win)*size of win - P(loss)*size of loss
helps objectively deal with risk.
Diversification
If you could rebalance your portfolio.....seems Perth property would be positively correlated with Chindia growth, so is there any point investing more directly in those economies via their stock markets, considering the risks and volatility?
If there's no urgency, then take your time and open your mind and explore other opportunities. mining leases?
If your tenant really wants the building today, why won't they want it in 6 mths for possibly more?
Bird in the hand
near money is dear money.......though where would you find a passive investment with as much upside if you sell?
Future Leverage
what's the future of credit? no one knows what's going to happen to interest rates or liquidity in Australia. whatever happens, it isn't likely to be as loose as it has been in the last 7 years. even if you get a big wad of cash, what's your credit limit going to be with reduced cash flows and reduced property for security? and what's the credit capacity of your tenant likely to be in 6 mths if rates move up or commercial credit criteria tighten.
Inflation
a big wad of cash might be nice earning 8% risk free....but remember to subtract whatever inflation really is and will be.
Expectancy calc
= P(win)*size of win - P(loss)*size of loss
helps objectively deal with risk.
Diversification
If you could rebalance your portfolio.....seems Perth property would be positively correlated with Chindia growth, so is there any point investing more directly in those economies via their stock markets, considering the risks and volatility?
If there's no urgency, then take your time and open your mind and explore other opportunities. mining leases?
If your tenant really wants the building today, why won't they want it in 6 mths for possibly more?
Dazz 12 years of working is a longtime, and as i don't know the numbers nor do i want too sometimes when this pops up in your investing life it's better to take the money and leave something in the deal for the next punter waiting in line, with the spread of properties you both control the C-G would still balance itself out over time one would think..IMHO..
..willair..
This is all out of my league. But do you really need to sell? Right now?
What's the worst that can happen in the next 6 months if you keep it?
Maybe the open ended cheque book price comes down a bit to a not so open ended cheque book? So then the decision is made easier? Keep it and watch it go up in value all the while increasing rent?
If the CFO is talking buying then the company must have good future prospects?
Go with your mentor - he sounds like he's given you good advice so far.
What's the worst that can happen in the next 6 months if you keep it?
Maybe the open ended cheque book price comes down a bit to a not so open ended cheque book? So then the decision is made easier? Keep it and watch it go up in value all the while increasing rent?
If the CFO is talking buying then the company must have good future prospects?
Go with your mentor - he sounds like he's given you good advice so far.
Sorry but I think the new CFO is "full of it". It doesn't matter what he wants, it only matters what the board decides. And if they passed up their "first right" seven months ago, it's going ot take one very, very persuasive argument for them to REVERSE that decision just seven months later ...plus pay a LOT more $$ into the bargain. Does that make them look like idiots or what? Call his bluff ... pull an "I wish" number out of the air, add a "safety factor" and slap it in front of him.
If by chance it does happen, great. Selling property for more than bank val's impresses bankers.
LL
If by chance it does happen, great. Selling property for more than bank val's impresses bankers.
LL
Dazz
I know you are not big on plans but how ideally would you like to spend the next 5 to 10 years? (no need to answer publically)
If you sell will that become possible? If you hold is it still possible?
Have you put most of your money on red? Should you move some to back?
If you sell and the market continues its upward movement will you regret the sale?
If you hold and the market holds or moves backwards will you regret not selling?
If you sell do you still have enough other property in the same property market to take advantage of any growth?
Being cashed up in the next couple of years could put you in a most adventageous postition and greatly lessen any risk.
"Gotta know when to hold'em, gotta know when to fold'em, know when to walk away, know when to run. You don't count your money while you're sitting at the table, there'll be time enough for counting when the dealing's done."
Life is short. Live it.
I know you are not big on plans but how ideally would you like to spend the next 5 to 10 years? (no need to answer publically)
If you sell will that become possible? If you hold is it still possible?
Have you put most of your money on red? Should you move some to back?
If you sell and the market continues its upward movement will you regret the sale?
If you hold and the market holds or moves backwards will you regret not selling?
If you sell do you still have enough other property in the same property market to take advantage of any growth?
Being cashed up in the next couple of years could put you in a most adventageous postition and greatly lessen any risk.
"Gotta know when to hold'em, gotta know when to fold'em, know when to walk away, know when to run. You don't count your money while you're sitting at the table, there'll be time enough for counting when the dealing's done."
Life is short. Live it.
You're keeping the shed.
What you do when investing is so far out of my league that I simply don't have any useful financial advice on the sell/hold scenario to add.
But I do know people. And people, Dazzling and not so dazzling, rarely ask a question without already having a pretty good idea of the answer.
I think you've just been thrown a left-fielder and are still assimilating the situation. You've answered every question thrown at you in this thread with ease, so you've obviously been considering this from all angles. You already know what you want to do with your shed. Be confident that as with your past decisions, the decision you make will be the right one. Good luck with the new job.
Cheers!
DJ
ps, as per the title, I think you'll keep the shed
What you do when investing is so far out of my league that I simply don't have any useful financial advice on the sell/hold scenario to add.
But I do know people. And people, Dazzling and not so dazzling, rarely ask a question without already having a pretty good idea of the answer.
I think you've just been thrown a left-fielder and are still assimilating the situation. You've answered every question thrown at you in this thread with ease, so you've obviously been considering this from all angles. You already know what you want to do with your shed. Be confident that as with your past decisions, the decision you make will be the right one. Good luck with the new job.
Cheers!
DJ
ps, as per the title, I think you'll keep the shed
