Urgently seeking JV Partner(s)

[shooting star]

Am seeking joint venture partner(s) - with borrowing capacity of up to $300,000.00 to assist me in a land deal in Chapel Hill, Brisbane, Queensland.

Basically, I have secured several blocks of land to be on-sold as "house and land packages". As we will not be responsible for the building the risk is minimal and the return I am offering is 50% of the net profit which I anticipate will be accessible in 3-6 months.

Each land parcel will have a total net profit of between $60,000 to $100,000.00, depending on how quickly we can on-sell and other factors.

I must move quickly on this deal - it must be finalised no later than Wednesday this week. I have a comprehenisve due diligience report and scope of works and costings.

The "cash on cash" return in this joint venture project will be from 30% - 200% in just 6 months.

If anyone is interested in speaking with me about this please call Kate on 0415 149 849. Please only call if you are serious about the possibility of investing and would like to see the due diligence report, as time is of the essence.

Thank you for understanding.

Kate

 

[hils]

JV

Could possibly help out but timeline is way too tight. One must do one's homework and not be driven by promises of instant wealth.
Regards
Hils.

 

[shooting star]

Addition to earlier request

This is a legitimate deal that I have put together and now found myself a little to under capitalised to complete it on my own.

Me, never being one to walk away from a challenge am asking for any interested parties to to at least look at the figures and due diligence report before making a decision.

Before you sign anything with me I will insist you seek independent advice from a lawyer or accountant (or both) for your own protection.

I will also supply you with the due diligence reports and figures so you will be very informed before committing to any deal with me.

Please consider this offer as it is genuine.

Thanks again

Kate

 

[Mike]

Hi Kate,

We welcome deals being posted here as long as they contain some educational quality and the poster agrees to answer our due diligence questions.

I'm interested in the contents of your due diligence report so would welcome some of the key findings being posted here. May spark some debate.

I'm also wondering what the cost of the land is?
How many independent valuations were done (if you are putting other peoples money at risk I suggest 2 or 3 independent valuations)?
What do you mean by "secured" the land? Do you mean you have purchased the land or optioned the land?
Will the investors money be held in trust?
If the construction is abandoned or doesn't proceed what guarantees are there that the investors capital will be returned?

Regards, Mike

 

[shooting star]

Due Diligence

Mike

Thank you for your concerns. I will answer them to the best of my ability.

Due Diligence Report

The due diligence report contains information relating to the demographics of the Chapel Hill area including:

(a) information relating to the professions;
(b) ages;
(c) income;
(d) education etc;

of the residents of the suburb.

It also contains information relating to the real estate trends (ie: rentals and medium sales) (as gathered by the REIQ).

I have systematically found every property in Chapel Hill that has sold for over $400,000 in the last 12 months and taken photographs of them. With each photograph is a bio about the property that cannot be seen with a photo (ie: if the property has a view, whether it is neatly presented, whether or not there is a refuse tip accross the road etc)

There are also 360 degree photos of the estate. Photos of each individual block and their outlooks, photos and details of the nearby facilities, ie: shops, schools, parks, lifestyle areas.

A UBD map showing where the estate is located in Chapel Hill.

Details of other developments in the area that may detract or add value to the estate and photos of them. These other estates are also marked on the UBD map so their location in accordance with my estate is measurable.

I also have streetscape pictures of the street it sits in and picutres of the houses immediately surrounding the estate.

Included in the due diligence pack are estimated time lines and figures relating each individual block.

I have done this so any out of state buyers will have as much information as I can possible find for them.

The Cost of the Land

There are 4 blocks in total and 3 available (one has been sold).

Lot 13 is selling for $175,000.00, Lot 18 is selling for $165,000.00 and Lot 22 is selling for $240,000.00.

Independent Valuations

As yet I have not received independent valuations on the land as the other blocks in the estate have sold and settled for the prices above - so the values of these blocks have been proven to be reasonable.

Independent "on-completion" valuations will be obtained as soon as the architectural concept plans and build costs have been received back.

Secured the Land

I have held each of the lots with an initial deposit. One of them has been signed up under a normal contract. I am at this time arranging for some option contracts to be drawn so that we can sign up the others under option contracts (if necessary). I have negotiated a 90 day settlement on each of the blocks.

Money being held in Trust

Yes the investor's money will be held in trust (in my lawyers trust account).

Construction being abandoned

As this system only involves building in an absolute worst case scenario then the builder going broke or construction halting is only a small issue.

Construction on the land will not commence until the land has been on-sold to a "home owner" purchaser by that stage our risk is very minimal.

I hope this has answered your questions.

Kate

 

[Michael Yardney]

Kate
You say the investors will get their return in 3 to six months.
How is this possible?
Initially you say you will build homes on the land. Even if you do on sell to another party, you can not access their depost until the properties are completed and you have settled the contract.
Then you say you will not build - Why would someone pay you more for the land than you paid for it?

 

[shooting star]

Michael

Thank you for your questions.

The anser to the investor receiving their return in 3 - 6 months is that is how long I anticipate it will take to on-sell the packages and we get the profit when we settle on the land portion of the packages.

I never said I build homes on the land. If you re-read you will see that I sell "house and land" packages where we are not repsonsible for the building.

I don't understand your question in relation to the deposit - would you please re-phrase?

Why would someone pay you more for the land than you paid for it?

Because the land is part of the whole "package"? If they were buying just land then they wouldn't pay more for the land but as the land is being sold as a "package deal" they are paying for the whole deal - not just the land.

I hope this helps

Kate

 

[Mike]

Hi Kate,

Thanks for the due diligence info. On the subject of Independent Valuations (IVs), you said:

"As yet I have not received independent valuations on the land as the other blocks in the estate have sold and settled for the prices above - so the values of these blocks have been proven to be reasonable."

I'm still a bit uneasy about this and would suggest the JV partners pool the cost of an IV.

In this post, my reply is in two parts. Firstly, I've done some maths based on 6 people in the Joint Venture to estimate their nett profit. Secondly, I seek further clarification regarding exactly how you propose to make the profit.

Part 1 - What is my projected net profit?

Total Land Value = $580,000
Assume 6 JV partners have a commitment of $97,000 each.
Assume 6 people put $20,000 cash deposits each in.
The balance of $77,000 per person is borrowed at 8%
Interest earned over 6 months = $3,000
Sundry costs and fees = $2,000
Total profit realised when all lots sold = $210,000
Gross profit per person = $35,000
Gross Profit minus interest and costs = $30,000
After CGT @ 30% = $21,000
After CGT @ 42% = $17,400
After CGT @ 47% = $15,900
Cash on Cash return on tax rate of 30% = 21,000/20,000 = 105% in 6 months.
Cash on Cash return on tax rate of 42% = 17,400/20,000 = 87% in 6 months.
Cash on Cash return on tax rate of 47% = 15,900/20,000 = 79.5% in 6 months.

Comment: The above figures show that the deal is probably worth doing if the capital can be preserved in a worst case scenario. In that case you would be out of pocket for the interest and costs. However, if the solicitor's trust is earning interest which is returned to you, then that can offset the lost interest.

The above figures are based on 100% of the nett profit being returned to each investor, however Kate, in post #1, says, "the return I am offering is 50% of the net profit". In otherwords, if the gross profit is $210,000 then Kate would take 50% which is $105,000. The remaining $105,000 is divided by the other 5 investors. This means the gross profit per person is reduced from $35,000 to $21,000 while Kate's profit is $105,000 which is 5 times greater than the profit received by the other 5 investors. Kate, are you willing to reduce your profit share to secure the other JV partners? Could you also clarify what you mean by net profit?

Part 2 - How is the profit made?

Kate, you made the following statements in your previous posts:

The land is to be on-sold as "house and land packages".
The risk is minimal because we will not be responsible for the building.
As this system only involves building in an absolute worst case scenario then the builder going broke or construction halting is only a small issue.
Construction on the land will not commence until the land has been on-sold to a "home owner" purchaser by that stage our risk is very minimal.
I never said I build homes on the land.
I sell "house and land" packages where we are not repsonsible for the building.
Because the land is part of the whole "package"? If they were buying just land then they wouldn't pay more for the land but as the land is being sold as a "package deal" they are paying for the whole deal - not just the land.

Kate, could you clarify what your definition of a "house and land package" is, please.
Secondly, what are you doing with the land in the 3-6 months to make it saleable as a "house and land" package? I assume you are not just buying the land and marketing it that way without improving it in some way.

So far, you have said that you are not improving the value by building and yet you've said that the value is improved by marketing and selling as a "package deal". Could you please explain exactly what you mean by "package deal"? I'm trying to understand where the improvement component is to justify your profit projections.

Regards, Mike

 

[Ross Sondergeld]

Well done Mike...

Kate...


Please respond...

(Mike, I love a logic person...)

 

[Mike]

Thanks, Ross for your kind words. I'm glad I had another look at my previous post because I noticed a typo which I corrected and a word I replaced with something more appropriate.

I also would welcome some more feedback from Kate because I thought the thread was developing into a good one. I think the whole issue of Joint Venture deals should be discussed more often because I think there is a real interest in this issue.

I've just returned from a seminar which Nivia Pryor attended as one of the speakers and was run as part networking in the Feestyler tradition and part Q&A where the Panel which included a builder, accountant, financial advisor/mortgage broker, solicitor etc fielded questions from the audience. The feedback from some of the other investors I spoke with during the networking session was their preparedness to joint venture with other investors to participate in deals.

The idea of going it alone and waiting long periods between deals is something which doesn't appeal to many investors. So I hope in future these joint venture deals will lead to more discussion to help people fully understand the pros and cons of joint ventures.

Regards, Mike

 

[Sunstone]

Dear Mike,

Good stuff. I think we should be encouraging people to put joint venture proposals up on the forum.

There can be many times when people can come up with good ideas and have a good opportunity but only have sufficient capital/finance to fund the purchase but not to complete the development.

At the same time however these proposals MUST be disected because even the most experienced can miss important items and a third party opinion can bring out other risks or fleas that the project has.

Again risks and fleas are not bad things..... They just must be factored into the project and the profit expected to be achieved from the project must be high enough to account for this.

Cheers,

Sunstone.

 

[Mike]

Well said, Sunstone. There is a place for joint ventures because many investors are time poor and can't do renovations, wraps or flips for quick profits by themselves. So JVs as equity partners or investors is a viable way to make decent returns. But the person managing the deal really has to do much more due diligence than they may feel would be necessary if the deal was for themselves only.

A lady here in the UK who is presently doing JV deals has a network of scouts around the country. They may talk to 10 RE agents about a particular development in their area and say it is a good deal but the lady doing the JV still rings 10 other agents in the same area to confirm what the scout has said. So my point is you can't do enough due diligence with JVs. If she is holding the properties with options she is prepared to pull out of a deal and lose the option money at anytime if bad news surfaces about any deal.

Regards, Mike

 

[gerard]

help at hand

hi, has anyone taken you up yet if dtill open
send me email
to
[email protected]
Thanks
gerard

 

[shooting star]

I'm Back

I apologise for my absence, I have been away in Sydney doing some business and attending the Anthony Robbins seminar so have not had easy access to this website.

Thank you for the responses posted on this thread since I last wrote. I will attempt to answer the questions placed in that time as best I can.

Mike, In answer to your questions.

1. Projected net profit.

As there are 4 blocks of land and each has a different price I will give you one example of the profits.

Land Sale Price: $175,000

End House Sale Price: $600-650,000

Outgoings including surveyors fees, design costs, valuer's fees, marketing costs, legal costs, deposit etc $14,600.00

Settlement Costs relating tothe land (if we have to settle) including mortgage stamp duty, titles office registration fees, land stamp duty, conveyancing fees, 10% deposit etc. $22,437.50

After settlement costs (including 6 months mortgage repayments, council rates etc $6,412.00

on-sale of land settlement costs including conveyancing and agent's commission $17,050.00

If we have to build - the building budget including GST, build costs, landscaping and fencing is $308,000.00

These are worst case scenario figures based on the fact that if abosolutely everything goes wrong then this is what it is going to cost. I have also overbudgeted all the fees rather than underbudgeted.

As in Queensland you are allowed to sell 6 properties a year before having to obtain a licence to do so we will endeavour to market them ourselves so that we do not have to pay real estate commission.

Each of the contracts will be signed as an option contract so if we on-sell before settlement then we do not necessarilly have to pay stamp duty.

The developer will also take bank guarantees and deposit bonds in place of cash for the deposit. I have only allowed for cash in this example.

If we cannot get rid of the properties without building then the costs of building are included in the example.

Any joint venture partner will need to have the ability to finance a build if the worst happens.

Basically, if everything goes wrong and we have to build then feasibility is about 12% (not good - but still a profit).

If we sell and don't have to build - as planned then the feasibility is 20%.

If we sell the property at $650,000 we will then make a profit of 30%.

I have just become aware of a possible GST issue on the profit - which may dramatically change the profit. I will have to look at it further and if we do have to pay GST on the profit then I will not proceed with the deal as it will not be worth it using these figures.

How the profit is make?

Basically, the idea came from a developer who was selling house and land packages in an estate. He was securing the land himself from another developer then drawing up plans for houses and on-selling them to purchasers. He was only building when the land was on-sold.

I saw this and called a couple of banks to find out if it was possible to do this and take the profit at the time that land (with the drawings in place) was sold to the new purchaser. They said that as long as the builder and architects were locked into no variance building contracts and the new purchaser had to use the builder and architect in the contract and begin building within a set time then they would allow the profit to be taken at the time of the settlement.

Basically, this is principle invovled. We only build in an absolutely worst case scenario.

I have come accross a number of people who want new houses but do not want the hassle of going through the processes of building (ie: the plans, fixtures fittings etc) So we are providing that service for them. It is a new concept and I must admit that things may go wrong as it has (to my knowledge) not been done like this before, although with a little tweeking I am sure it will work.

In conclusin.

I would like to thank everyone who has replied to this thread. Your questions and responses (both on this public thread and privately through emails and phone calls) have assisted me greatly in understanding some of the riskis that I have or have not seen.

I still have 1 block available if anyone is still interested.

Other than that there are a number of other joint venture deals that I need asssistance with that I will post on another thread.

I look forward to any further comments.

Kate