Depends on your income to a large degree, but also your ability to do something smart with the money after the rent is paid. It is well known that most folks who rent simply waste all their expendable income. For the majority of folks who are average or below wage earners; buying a property is going to be the best way for them to develop wealth. It is a forced saving, and the return is pretty good over the long term compared to any other form of saving, and the inbuilt equity can then be accessed and leveraged into more of the same.
Agree Bayview. Also, I would think it would be quite annoying if the LL decides to sell the place you are renting and you have to upkellick and move.
dont worry about what other people think if they are just in it to make fun or judgement on it however if they are saying its stupid for a financial sense, then maybe hear them out you took a risk with the PPOR/IPs and it sounds like most of them paid off, congrats your business purchase as you say hasnt been very good, and the risk hasnt paid off, as long as you can learn from it, then its not all doom and gloom and I totally get the feeling of working for half the pay as before, its a humilating feeling, but unfortunately thats the risks with business. many folks get too worked up on their hourly PAYG rate vs business salary.
Nah, don't worry about me TMNT; I'm far too old to be affected by others' views of me or what they say about me. I meant that folks would think it is possibly stupid from a financial sense. Having said that; as I said earlier; renting and investing the difference between your rent and what a similar property as PPoR loan would cost is the smart way to go. You don't expect to be having to do that at my age though. We could use our $275K cash as a deposit, and probably borrow another huge amount for a swish PPoR again, but the cashflow would be back to crap. Won't be doin' it.
Thanks for sharing BV. Everyone wants to share the glamour stories, but it's important for younger users like myself to see that it's not always pretty skies and rainbows. It seems you've got the road ahead reasonably mapped out. If I could offer any advice, it would be to never underestimate a good SWOT analysis. If I was in your shoes, I would probably do the SWOT on: *get existing business up to speed & invest in 2nd business (tyre shop) *get existing business up to speed & invest in a 2nd business (Bali goods) *sell existing business for pennies & get a full time job managing someone else's business. *get existing business up to speed & take a 2 month holiday with the family and re-access thoughts. Just some ideas. Obviously have a play around with whatever crazy idea might pop into your head in the middle of the night. But I do love a good SWOT analysis. It's saved my arse before. Hope this helps. All the best with future. And again thanks for sharing. Cheers, Clint.
Thanks Clint. After several more discussions (up to about no. 1000 discussions with wife on subject now ) we have decided to do the following now that there will a cashflow surplus for once in years; 1. Develop the niche area of Roadworthy Inspections and repairs as a result. Set up cost - Licence courses, equipment and licence fees - approx $7k. Timeframe; 12 months 2. Continue operation of existing workshop business as well, and conduct upgrade of premises - reception area and office, storage - approx $30k for fit-out and furnishings, electrical, etc. Timeframe - 3-6 months. 3. Allocate advertising budget for ongoing business development - approx 1% of turnover per year. We have decided to not buy any further businesses, but will start a business with our BIL and SIL (they are already doing it and have shown it to be successful) of small development projects over in Bali, which will require an initial capital outlay of approx $100k, which will be re-invested into each future project. We will use cash for these projects - no loans and borrowing hoops/headaches to contend with. Rinse repeat. Plan is to complete one per year, approx ROI ~100%. Estimate is that every 3rd project will be holiday rental complexes of approx 5 individual villas, where ownership is retained byt us, and rents for cashflow. This plan is relatively low-risk, and will provide the ongoing cashflow and return we need on our capital, and will supplement the business, IP rent and wife wages. Th ongoing cashflow will be used to fund the next PPoR, without the need for any further dibilitating loan/s. Plans to start a new import business of products from Bali (high-end product) have been discussed with the BIL/SIL as well, but have been shelved for now and will be commenced later on. This will also not have the element of risk and necessity attached as it will be a side-line business that can be developed at out leisure
Your points 1, 2 & 3 sound good and sensible. The Bali stuff sounds a little too good to be true (coming from a position of zero knowledge). If you could get 100% ROI in a low risk situation then why would you (or anybody) do anything else ? You should just live off your capital until the cash starts rolling in from this investment. How well do you understand the business model and the risks involved ? I hope it is the great opportunity you spell out here - but I'd be careful.
+1 BV, I would like you to think one more time about handing your hard earned cash to someone in hope of 100% ROI. And if you must then do spend some money and go visit Bali and see things for yourself and once you are convinced only then part with your cash. Good luck! Cheers, Oracle.
I know nothing about business but this stood out to me as maybe something you don't need to spend $30K on? The mechanic we use works out of the local petrol station. He has room for two cars, with a large side area to park cars waiting for work done, all part of the petrol station I guess. His little office is grubby, the size of a toilet stall, but I don't care because I'm not paying for bells and whistles. I'm just wondering if that $30K could be saved or spent better. Could you tidy your office up without spending that sort of money?
1 and 3 I think is a goer @Bayview. Putting your money to work to improve the business is a good idea. I'm with @wylie in relation to whether 2 is worth it. I thought the issue was not getting enough revenue through, would these updates assist this in the immediate term? I also know nothing about Bali, but echo the note to be cautious and go in with eyes wide open. 100% ROI is not something that is normally risk free.
Yep; understand, and we will be going over to investigate each site as they come up. As I said; they are already doing it, have completed two already and now on two more, and the results are proven. The final result is always a fluctuating estimate of course, but even a 50% ROI for 12 months is not bad. We anticipate better than that. My BIL and SIL live there - have done for about 3 years now, and only look in their general area.
Without seeing the results; I'd agree totally. We can comfortably live off our IP rent from now on, plus there is also the workshop income now - both with no debt attached. We won't need to live off the capital. Our capital will sit in a high interest on-line account until needed, and we only anticipate utilizing approx 1/2 of it for these projects as a maximum - some in reserve at all times. We have been involved with our BIL and SIL as spectators and sort-of-advisers every step so far, so we have acquired some knowledge and "armchair experience". We would have loved to have gone in with them before this, but have been hamstrung by the asset rich/cash poor situation. No worries. My SIL is a massive cheapskate; we have every confidence it will work. We have to avoid the danger to get greedy, is all.
I'd also be a little (well, a lot really) cautious of investing into Bali. That seems way too good to be true. As for the importing, how would you move product? What kind of product is it? Do you have the contacts and the skill to make this work? For example, if planning on selling on Ebay, do you have the temperament to deal with the crazies, and infinately stupid customers? Not saying they are all like that, but there's enough of them that unless you can deal with them with kid gloves, they have the ability to ruin your business.
I sort of agree, but when I ran the "Keeping the Business Afloat" thread over at SS, a number of folk strongly suggested upgrading the appearance and image of the place; lose all the old signage and get rid of the "oldie-worldie" aspect of the place - folks expect more modern things these days. tend to agree, and whilst that image has worked in the past, I think that era has gone, and a more professional appearance can't hurt. I will be looking to spend as little as possible, but to compare ourselves to the Tyrepower, the Bridgestone Stores, Beaurepaires, etc...it needs to be done to some degree to keep pace with that type of image. To set up a nice reception area, with front counter, seating, wall displays of spare parts/impulse buy items, tyre and rim displays, plus an office area behind this; will require effectively building a new room within the building at the front door. carpentry, plastering, lighting, carpet, counter and furniture etc - $30k I reckon. But I don't mind; I will be able to finally budget for it and it is tax deductible as well.
Funny you mention the big chains. One of the reasons I love my local mechanic is that I don't have to sit in the shiny waiting room with the fancy coffee machine. In fact, we get our tyres done at the mechanic too. I think he might send it elsewhere, but the end price seems to be similar to if we went to the mechanic and then another day did the tyres elsewhere. I'd clean up the signage yourself (if it needs it) and save the cash. Not everybody wants "shiny and new".
Agree with this. Cleaning up the signage and a coffee machine would be low cost and good bang for buck. Even different furniture if required but don't see the value in a radical new fitout at the moment.
I see the value in the fit out, however would question if it can be done for much less than $30k. Of course, I suppose that also depends on how much you can/are willing to do yourself. When I look at mechanics, I see the older type with all the dirt & grease and the grotty areas and think 'cheap'. If I was to go to one of them, I'd expect to pay a lot less than if I went somewhere more modern looking. I go to KMart. They do tyres & mechanical. There is a small, clean waiting room, a modern counter, with the computer monitors behind it, and that's it! The whole area is probably 3 x 4sqm. They look professional and although they offer a cheap service, that service doesn't really consist of much. There is usually a list of things that need doing. They take the car for the day, do the service, then ring when it's ready. They usually ring and say "while doing the service we found xxx. It will cost xx to fix it. Did you want us to do it while we've got the car here?" Depending on what it is and/or how urgent it is, I will tell them to go ahead & do it. On a similar vein, they do rego inspections (pink slips) and they go over the car & then they do anything that needs doing for rego. I don't bother going anywhere else because the service has always been good and reliable, plus KMart fixed a problem with a car of ours years ago when no other mechanic was able to.....and it was something basic too, so I just shudder at the amount of money we threw at this car when, in foresight, the other mechanics really didn't do their job. If the place looks and feels professional, I think you will find people will feel that you are more trustworthy and be willing to part with their money. It makes it look like you know what you're doing and they will get a job well done. Besides, a coffee machine & a few magazines are cheap. Make sure you include some women's magazines too.
Most mechanics have womens magazines. Oh, you mean those womens magazines more likely to be read by women, don't you. When I get stuff done to my car, I just want somewhere reasonably clean and tidy to sit. That's all. If it's not drafty, that's a plus.
