...and then I thought...there's probably an investment property forum...

Discussion in 'Introductions' started by Blue Mountains, 28th Jun, 2021.

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  1. Blue Mountains

    Blue Mountains Member

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    ...and I was right! There's a forum for just about everything these days so why not for IPs eh?

    Hello!

    Not for the first time in my life, I'm coming from a different perspective. I'm a tenant, and I have a very good idea for an investor that would be mutually beneficial, but I'm not quite sure where I should (or could) post it to. On the one hand it might look like I am soliciting for business, but I don't view it that way, and on the other hand it is not what I would consider to be appropriate for the Market Place.

    So perhaps I should PM the Admin team?

    Cheer
    BM
     
  2. mickyyyy

    mickyyyy Well-Known Member

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    Just post it
     
  3. Blue Mountains

    Blue Mountains Member

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    Thanks for your reply.

    Do you mean just post it here or perhaps in the Market Place?

    Without going into too much detail, the basic idea is that I need a place to live for around the next 15-20 years, and I'm looking for an investor to build that property. Depending upon the land size and shape it could be a dual occ (main house with separate granny flat). There is not much land available in this region, and there are numerous reasons why it will continue to grow in value for a good while yet (these things are cyclic of course). The lack of available land is of course the primary reason, but there are several more.

    The property needs to be a construction for a few reasons, on both sides of the fence:
    1. I have certain design ideas in mind which will work well for me but also subsequent occupants
    2. Building technology has progressed to new levels in recent times
    3. The best depreciation benefits are from new constructions

    I'll leave it at that for the moment.
     
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  4. spludgey

    spludgey Well-Known Member

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    I'm not trying to have a go at you, but I'm not really seeing the benefit for the landlord yet.
    What's in it for them to build you a custom property?
    I'd only consider something like that if you offered (just as an example):
    • A 12 month rental bond that can't be claimed back if you break your lease
    • A 10 year lease agreement that's increased with market rent increases or CPI (whichever one is greater)
    If you offer something like that, you might have luck, but otherwise I don't see the benefit for the landlord, unless I've missed something or it's in the details that you haven't elaborated on yet.

    I don't want this to be too much of a negative post (I know it is a little), I think out of the box thinking is great and I love win-wins.
     
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  5. Sackie

    Sackie Well-Known Member

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    It's a development project which needs to be looked at by doing a thorough feasibility. Tbh 'you' as an individual won't matter at all (to me anyway) when I'm doing my feaso to see what the numbers look like. For me it's purely a business exercise. If you as an individual benefit from it, then all good. But your needs aren't taken into account when analysing the deal.
     
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  6. Blue Mountains

    Blue Mountains Member

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    No problem with that spludgey, I just don't want to run foul of forum guidelines. I have sent a PM to Simon seeking advice on posting, but to answer your thoughts:
    • Yes, a long term lease would be sought
    • Whilst the property would hopefully be custom built with my ideas, they are features that would appeal to a great many people, I would think.
    • There would be nil tenancy issues: where I am living now has only had one rental increase (<10%) in the eleven years that I have been here due to the work that I have done on the property (various improvements at my own cost and/or effort).
    There is plenty more detail that I can post, but I will await advice on the legitimacy of same.
     
  7. Blue Mountains

    Blue Mountains Member

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    Yes of course, and that is the whole point. I would be quite sure that the analysis of the project would produce very favourable results for the investor. I have done a preliminary spreadsheet (which needs some updating) but it basically shows that in a dual occ situation the cost to the investor (with a single taxable income of ~$90,000) of holding such an asset would be somewhere between cashflow positive to zero.
     
  8. Blue Mountains

    Blue Mountains Member

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    I probably should add that I used to work in the industry and as such have a very good grasp of how it all hangs together. We were using the Somerset software for demonstrating property performance to potential customers. I had previously come from an IT background, and I wanted a bit more flexibility in the software, so I wrote my own version of it (which was not a particularly big deal). This matched the results of the Somerset software in every test, so I had the proof that it was accurate.
     
  9. standtall

    standtall Well-Known Member

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    Why don’t you run this past your broker and you may be able to borrow the money to do it yourself considering you will have sizable deposit to pay a 12 month bond.

    What’s stopping you from being your own investor?
     
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  10. Trainee

    Trainee Well-Known Member

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    But zero to slightly positive cashflow isn't very attractive to an investor.

    A favourable result isn't enough. You are adding a lot of limitations to the investor (specific design, long term lease). Why would an investor choose your project over some other IP? Why can't they just build the same thing without you?

    Think about what the investor's alternatives are. Will the project you propose have higher cashflow or higher capital gains compared to a comparable property in the area (but doesn't have your limitations)?

    Unless you can convince an investor of that, why would an investor go for it?
     
    Last edited: 28th Jun, 2021
  11. Blue Mountains

    Blue Mountains Member

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    A 12 month bond wouldn't be anything like the deposit required.

    In any case, I don't have a taxable income and I wouldn't have the borrowing capacity.
     
  12. standtall

    standtall Well-Known Member

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    Forget about a custom built house, without a taxable income you don’t even qualify for an existing rental property.
     
    Last edited: 28th Jun, 2021
  13. Blue Mountains

    Blue Mountains Member

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    The design isn't as specific as you may be thinking - it's just good design (IMO), and of course would be entirely dependent upon the land shape and size.

    I would have thought that a long term lease would be attractive to an investor, rather than an impediment.
     
  14. Trainee

    Trainee Well-Known Member

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    Depends on rent increases, and what happens if the investor wants to sell? And how would the investor know you are a good tenant? How would they be convinced you could pay the rent at all (since you state you have no taxable income)?

    You are not thinking from the investors perspective, imho. But good luck with it.
     
  15. Blue Mountains

    Blue Mountains Member

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    Millions of pensioners might disagree with that, but more importantly I'm not the only person in the equation. The other person owns real estate in another country, but money cannot be moved out of there, so it complicates their situation. (they do have a taxable income)
     
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  16. spludgey

    spludgey Well-Known Member

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    I think if this conversation is to go anywhere, you might have to put your cards on the table. What exactly are you talking about?
    It sounds like you're not selling anything, so I would imagine Sim would be fine with it.
     
  17. Sackie

    Sackie Well-Known Member

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    Leasing to tenants generally speaking isnt an issue. If an investor is going to tie up his time/money/serviceability etc, its not going to be for something thats CF neutral. Most developments would be neutral to positive anyway.

    There needs to be a return on development costs. In a real dollar sense.
     
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  18. Wiz

    Wiz Well-Known Member

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    This doesn't sound like an attractive investment to me.

    I can build my own house according to my own good design that is not dictated by anyone else. Then I can lease to anyone I choose. If it's a good house in a good area, I won't have any trouble finding tenants for as long as I choose. In fact, being forced to rent to someone over the long term who may turn out to be a bad tenant sounds like a disadvantage.

    Maybe if you paid above market rate rent with guaranteed yearly rent increases then I could see some benefit. I would need to make a decent profit through sizeable cashflow positive returns in order for this to be attractive to me.
     
  19. Blue Mountains

    Blue Mountains Member

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    Yeah, thanks for that. I hardly think I'd have been in the same place for eleven years with one <10% rent rise if that was the case – rather more the exact opposite, wouldn't you think?
     
  20. spludgey

    spludgey Well-Known Member

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    This also means that you're paying well below market rate though. Your proposal would have to be above market rent for anyone to give it serious consideration.
    Sorry, unless you can show me something I've missed, I just don't see how it will stack up for the developer/investor/landlord. The promise of being a good tenant (which I'm not questioning you are), simply isn't enough to part with the best part of a million dollars (assuming on your location, could be more).
     

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