New investor looking to start empire.

Hello people my name is Michael, im 28 and i am about to start down the property investing path.
I am a full time spraypainter on $75,000 gross per annum.
I have an owner occupied house in my own name and have just renovated and refinanced to 80%lvr.
Property is worth $280,000.
Loan $224,000.
$30,000 in mortgage offest account.

I have 2 paths at the moment that i can take to begin my investment portfolio that i need some help on to decide.

Option1: form a company and buy the automotive spraypainting business i work for.

Or

Option 2: stayed employed on $75,000.

Do i pay $100,000 for a business that generates $110,000 profit (including owners wage) or stayed employed on $75,000 with less stress.

Goal is to retire from spraypainting in the next 12 years to focus on my portfolio and enjoying life away from an active income.

 

Welcome to PropertyChat Michael.

With regards to the business, if you were to buy it do you see any potential to increase earnings?
If so then that could be something to consider.

Alternatively you could stay employed and maybe pick up a second/weekend job to increase your income. This will help improve/increase your borrowing power.

 

A business with 110k profit would only sell for 100k?

 

Thankyou for your swift replies.

In regards to the $110,000 gross profit the business makes, this is wage included.
So the profit i would actually be making is $35,000 on top of my wage using my current wage as an example.
The wage and profit would depend on how i structure myself and the way i pay myself as an employee of the company.
So realistically the business will give me an extra $35,000 gross to play with.

There is definitely potential to increase the earnings via putting in the extra hours.

I guess the question i should ask is would the banks lend more to an employee earning $75,000
Or
A business under a company structure.
Say i decide to pay myself $50,000 out of the $110,000 i have to work with,
That leaves $60,000 gross profit in the business account.

 

Not unusual - there's many businesses which sell for 1x or lower multiples.

 

What is turnover ?
Has depreciation on plant been deducted from profit

Trying to workout profit sensitivity

So borrow $100k cost say $10k

SO real net profit is $35k less $10k is $25k?
If income drops $30k you lose money?

 

Turnover is $300,000 on average over the last 5 years.
The owners are cash hungry and take about $30,000 to $40,000 a year undeclared ( i have personally worked for this business for 13 years and have seen the amount of cash sales they take.
Seeing as my purpose is to have maximum profit to make the banks lend more ill be declaring this income.

 

My first question is back around your objective (great to see you've got one by the way!). Have you put any numbers around what this would look like?

E.g. What income do you need? will you still be working PT in some form? Therefore what investments / growth will you need to make in the interim to achieve that goal?

From there you should be able to work back and structure up a plan to help you decide the best course going forward. As a general rule my philosophy was to do everything possible to maximize my work income and leverage that as much as possible. Hope that helps!

 

Short-term goal would be to have a passive income of $100,000 per annum within the next 12 years.

Long term goal is to have a passive income of $1,000,000 per annum.

Goals are always changing and most people when asked how rich do they want to be usually respond with "As rich as possible!".

Unfortunately i can only grow a automotive spraypainting business to a certain size and there will come a time when i will sell it and look to aquire a business with more return in mind to keep my portfolio growing.
Whether that is starting a property development business or something else i am unsure.
First step is structuring myself correctly, educating myself and working with what i got and what i know.

 

I think the main question you need to be asking is really about do you want to own a spray painting business or be an employee in a spray painting business for the foreseeable future. If you don't want to run the business it could just end up being a ball and chain around your ankle. Then you need to get a good accountant and mortgage broker who have experience in the two interests you have.

 

The window regulator ( manual wind up) on my vt commodore is cactus. Window only winds up 90%.

The balance I have to push up by hand and it looks like I'm tampering with a vehicle which has attracted attention from the cops in Mt Druitt.

1. Is a window regulator easy to DIY?

2. Have you thought about investing in Mt Druitt?

 

No idea what you are on about.

 

Fair enough.

 

Elaborate.

 

As a spray painter I thought you would know about a window regulator. But I might be wrong.

Secondly, I mentioned about investing in Mt Druitt. It's a suburb in western Sydney. Cheap entry point for houses in my opinion.

It might be an area to keep an eye on if you intend on building an empire.

 

I would suggest getting a new regulator from the wreckers.
It will be cheap as chips.

As far as where i will invest,
Ill be targeting the wa market.

 

...or a harem.....

 

Please explain.

 

You might be waiting a long time.

I know the Sydney market has come off the boil but it could be the place to pick up that bargain of a life time.

I also know that investors like Sash are keeping a close eye on Sydney (he never stops mentioning it lol).