So, we bought a property...

Congratulations.

Good you have a couple of years to work on options.

Building townhouses sounds like a good option that gets you both the lifestyle and the investment income.

The next 18 months will give you a chance to assess the business and the mortgage so you'll know what to do.

Retirement thoughts have to feature heavily at our age !

Best wishes for 2016 and beyond.

 

Will you need to take on another mechanic to help with this extra work?

If so what would that cost?

 

Yes; if we averaged 3 inspections per week (plus the follow-up inspection after repairs are carried out as per the first report) then this would equate to approx a further 4-6 hours per week for those, plus whatever extra work required after the first inspection's repair list.

The figure of $100k per year extra turnover would probably mean needing an extra mechanic, and is part of the cost of producing that income - hence the nett profit being down around 30% (or maybe less?). Most of the cost is labour for the inspections which are typically around $180. Allowing about 1.5-1.75 hours for both inspections at $110 per hour labour for our normal hourly charge for labour; that's about right for each inspection. The first inspection is the longest time, and the follow-up is really only to ensure that the repair list has been completed as per the report.

The mechanic gets paid $23.50 per hour (at least; mine does). The Award rate is lower than this, but to get anyone good will cost more. So; a fulltime mechanic on $23.50 per hour equates to roughly $50500 per year including Super, but there would be a few hours of overtime each week (their normal week is 37.5 hours but we work 8.5 hour days; so a further 5 hours per week at overtime rates - call it $55k per year in round figures; but his whole week won't be dedicated to just r/w work I suspect - maybe half of it.

Initially, we would continue as is with one mechanic and myself. Currently, we are only ever around a week in advance for services at best, and that is allowing for only 3 per day (for the mechanic), which also allows some time for unexpected things during those services, and/or "blow-ins". I do the tyres and punctures and admin work, and some of the basic service stuff to help him out if we get a bit snowed under.

Assuming we started to get close to the 3 inspections per week for r/w's, we would start to get out to over a week wait for services, and start to have trouble fitting in the more urgent "blow-in" stuff. Just before Xmas we were running a week behind, and we found it difficult to get to the blow-ins and emergencies quickly. But; no-one knows how busy or quiet you will be, so you can only operate with what you have - all workshops are in the same boat with this problem.

If they don't want to wait - or can't wait - they have to decide whether to go elsewhere and hope someone else can fit them in. We do try to give folks fair warning that their car might be sitting at our place for a few days before it gets fixed/looked at, and let them make the decision. Most folks don't have a problem with that. It's not ideal; but at least they know and won't get mucked around with an unexpected wait time.

And, there is the possibility of picking up extra regular services from any new customers who come in initially for r/w's.

This is when it would become necessary to have the extra full-time mechanic.

 

Fair enough Bayview, good luck with it all.

 

Yes; sorry; not what I was trying to convey.

I know about that mindset of "I can't afford it" versus "How can I afford it?" (Rob Kiyosaki).

What I meant was; unless we can go back to the Hill with at least the same level of property/aspect/position/view/proximity to amenities etc - we won't ever do it again.

We've done the amazing view thing; and while it was terrific to look at, the financial scenario was not staying at the level we initially had when we first had that view, so it became a hollow pleasure...nice view/house etc but steadily diminishing to no lifestyle as the workshop went further south..

We have now adjusted our criteria to; a nice but not opulent and expensive house and pool, but in a good locale and a quality street that will always be in demand..

And; the option to turn it into a townhouse project instead is always there.

 

This is a great step for you Bayview and I expect it will go well.
In terms of the acquisition price it appears you have done your comparatives so I don't expect you overpaid for it. I've adjusted my mindset (at least as regards PPORs) that sometimes when you find the right place don't try to screw the seller down but just give them (within reason) what they are asking. You can now commence locking in your plans- a process I am currently doing which I have neglected for too long being caught up in the day to day minutiae of running a business..
Many of us have read your posts about small business and for those of us also in it we can sympathize with the continuing obstacles which after a while can grind you down. your 1st post reflects renewed energy so I expect this may be a turning point.
Any chance of putting the pool in for the tenant to increase the rental and get a tax deduction?

 

Yep; the agent said the Vendor was originally wanting $700k before it was listed, but he advised him to start at $650+ based on that similar sale for $655k in Aug a few metres down the street.

Hadn't thought of the pool going in earlier, actually.

Not a bad idea; the pool will need to go in before the house is built, and at the moment the access down the right side of the property is very good - a driveway but no garage to block it off.

Based on the condition of the house and particularity the condition of the yards; I suspect leaving the maintenance of the pool to the tenant would be a bad idea (she's not much of a garden-proud person from my observation)...I reckon I'd shell out for a pool service guy to come around each month and do the chemicals etc for her instead.