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LOW EQUITY STRATEGIES
cash-cow - Coggle Diagram
LOW EQUITY STRATEGIES
Joint Venture
Types
JV with owner: No property but open, subdivide, reno,...
JV with investor/money partner: Friend,other
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JV with professional/specialist: Builder, Banker, Architect, Planner, Engineer, Project manager
Questions
What comes first/ deal or JV?
- both take time, so do it at the same time
When do I need a JV agreement?
- find project & JV partner > determine project viability > JV agreement
Where can I find JV?
- events, friends, mortgage broker, accountant, solicitor, architect, planner, surveyors
What should you discuss?
- Joint venture checklist and information PDF
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Important Tips
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After Deposit Finance (Vendor Finance) > MUST 1st renovation 2nd re-value (pull the money out) then 3rd Subdivision 4th Build at the back.
*Seller JV's
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Characteristic
A seller with limitations, e.g. money, knowledge, time.
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Benefits
- No holding cost: no need to pay fees like land tax, council rates, sewer rates, etc
- No deposit; don't worry about 10-20%depossite
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- No limitation on the volume
- All you need is your Smart
- No limitation on the price point: you might need to change strategy, and you can because you don't purchase the land.
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Vendor Finance
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What
Explain: when person who owns a property sells someone and allows them to occupy it, and pay for it over time > stepping stone to normal finance
Reasons: not enough deposit / self-employed / no credit history or credit problem / can't prove income / New AUS
Licensing Requirements: Credit provider license > lease option and deposit finance - Real estate agents license
Sandwich Lease
What: A sandwich lease is where you are both the buyer and the seller for one deal, using the lease option.
Situation and process:
1- Find seller who is in a sticky situation and desperate to sell.
2- Cut vendor finance lease option deal with low upfront payment
3- Renovate as needed
4- Find a buyer for the property with a lease option agreement can't get regular finance
5- Set nice margin on upfront figure and weekly repayment figure
Signage, Airspace & Solar
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Solar Power (Grants)
Put solar on roof of commercial and sell it to tenants
- Cash flow, interest, ⬆️ power prices, ⬇️REC values
- funded by the federal government
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- being tax-deductible until system is paid off
Renovating
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Doing the Nitty Gritty
Increase the rental return:
- More bedroom
- Neat & tidy garden - less gardening
- Cosmetic reno: kitchen, bath
Procedure
Check Excel file: "2-Real-Estate-Express-Renovations-Revised"
Lease & Sub-Lease
Commercial subleasing
- Landlord's consent is required.
- make sure new tenant obligations cover all landlord obligations
Residential subleasing
- Owner approval > head lease needs to allow sub-leasing
Room by Room
NOT fall into the rooming or boarding house legislation > need comply w building code> smoke alarms linked, disability access
FALL into the rooming or boarding house legislation > need comply w building code> smoke alarms linked, disability access + comply with rooming & boarding house legislation and registered
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Short Stay Rentals
Reasons
- Run remotely
- Flexible
- Less wear and tear
- No luck with rental contract
Money $$$
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Cost involved: Setup-cleaning-advertise-manage-Laundry,etc
Be careful of the Banks! 1- Hard to financing rooming house
2- DO NOT cross-securitise with this asset.
Executive Leasing
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Procedure:
1- look existing properties
2- invest who is main player and located
3- ring around to get costing and demand
4- see if there is a property suits > consider units & apartments
5- do cost benefit feasibility on purchase and remodel property
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Cash Cows
BASICS
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The doubling rule of 72:
The Rule of Two:
Take the purchase price – e.g. $200,000 – divided by 1000, multiplied by two= rental $400 per week for positive cash flow.
% POINT SPLIT:
difference between what your money is costing you to borrow and what that property is actually returning you.**text
e.g. $1M commercial property, 10% return on the property (yield), and the interest rate is 7%. The difference between is 3%.
3% X $1M = $30k. so that property is $30k positively geared.
How to calculate ROI
Rent(income) x 52 weeks = Total / property price x 100 = Gross ROI ,so 135 x 52 = 7020 / 65000 = 0.108 x 100 = 10.8%
Break-Even Vacancy Factor
When property has > number tenants> risk a vacant > reduced.
p.s: calculated in word file
WHAT IS IT?
A cash cow is anything that brings you more income than it costs.
first benchmark=> totally replace your current income
LUCK
STRATEGIES
Manufactured Cash Cows**
not necessarily cash flow positive when you buy , but you are able to do something to the property to increase its yield. like:
- Reno: extension, garage or a carport.
- Additional services internet, TV &pool or garden storage space.
- Rent room by room basis
Direct Cash Cows
from the day you buy them, earning net profit after all expenses.
WHERE TO FIND THEM
Lower Socioeconomic Areas**
generally have a lower entry p purchase, but the rents normal
Regional Areas**
regional area that has a consistent, strong demand for rental
Looking at Rural Areas**
Think, if you buy a property in those kinds of areas
FACTOR TO CONSIDER
Multiple Incomes – Residential:**text
- entire block of units
- complete residential apartment buildings
- house with upstair and downstair
- house with granny flat
- boarding house
Multiple Incomes – Commercial**
- number of wearhouse
- strip complexes
- shopping centers, office comlexes
- storage sheds
Higher Yield – Lower Risk
When property> multiple tenants > multiple income sources > return higher than single tenant dwelling.
p.s: price is not much more than single resident
FUNDAMENTALS
Strong rental yield area >mining town
Important tip1: look at the dynamic of the resource, china,...
Important tip2: you need to know all of the gossips,Talk to people
MULTIPLE INCOME STREAM PROPERTY GIVE YOU THE MOST YIELDif they don't have it go and make it. e.g. storage facilities, devide to complex, carpark, office complex, small shops
Use manufacture growth strategies
The more strategy put together, the more money you gone make
Where people have to work (strong demand areas)
look at the dynamic of regional town agriculture, tourism, energy
Close to employing hubs**
Like shopping centre, transport, hospitals, universities, café strips
When this hub created**
look at demand and high transition area=>wait rent increase in the next few yrs. e.g. When is the creation of a shopping centre
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Maximise your yield**
increase the yield > maximise your income. e.g. how many properties you can put on the land
Negotiation
SKILLS
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2- Preparation MOST IMPORTANT
what you might expect what you want out of the the the outcome of the encounter and perhaps a few plan B along the way
3- information exchange (Ask questions)
1- it's not always money, it could be totally irrelevant things
2- they're not going to be interrogated, you're genuinely interested in them. e.g. why move, motivation selling => WIN-WIN
4- Reaching agreement, and commitment
1- more information gather before get there, better plan your approach and you get an agreement.
2- put any agreement and commitment into the writing.
TIPS
understand the personality of the agent and seller and who's pulling strings with him or her => WIN-WIN
let them know that you're serious: you are investor, you have finance and borrowing capacity and all these attrivutes.
Picking up the phone and talking to people is very important. It's not just searching on the internet.
PEOPLE who Interacting
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Solicitor
1- explain to your solicitor exactly what you want
2- make sure that your contract covers covers those negotiations
Agent
Confidence with Agent
it starts before you even pick up the phone for the first time to inquire about a property. may attack, shock, to see are you able complete deal > offer another one > Friend?
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