matt jones buy reno sell with a twist. current deal… not what you think 647m 2 4 bed 2 bath pool...

MAT T JONES

Buy Reno Sell with a Twist

Current Deal…

Not What You Think

• 647m2

• 4 bed• 2 bath• Pool• Rear access

The Beginning

Agent called me before it went to marketVacant for 10 years, used as storage after

divorceBought it cheap with a view to Buy-Reno-SellEngaged a builder to do all the workBrought in JV partner to fund the deal

Cash Out Cash In

Purchase Price $342kPurchase Costs $13kReno Costs $90kHold Costs $10k

(4months @ 7%)

Expenses - $455k

Sale Price $510kMinus

Agent $15k Staging $3k GST $9k

Net Sales Proceeds- $486k

Budgeted Numbers

Expected Profit $31k(Nothing to write home about but I could do it remotely)

Before After

Street View

Before After

Living Area

Before After

Kitchen

Before After

Dining Room

Before After

Bedroom

Before After

Main Bathroom

Before After

Backyard & Pool Area

Adding Value - New Ensuite

Adding Value - New Deck

Cash Out Cash In

Purchase Price $342kPurchase Costs $13kReno Costs $120kHold Costs $15k

(6 months @ 7%)

Expenses - $476k

Listed Price $539kMinus

Agent $16k Staging $2k GST $9k

Net Sales Proceeds - $512k

Actual Numbers

Expected Profit $36k(More Potential Profit But No sale)

So Far No Sale

Debt was growing and eroding profit

Market dropping

Market sentiment poor

Brought in another money partner to cover extra costs

Assess Options

Plan A: Stick my head and the sand and wait for a buyer? Yeah Right

Plan B: Negative gear until market improves…. At $1800/month? No way!

Plan C: Get Creative!

Plan C: Vendor Finance

Market the property to someone that cant acquire traditional finance – Perfect for large family, self employed, no financials or low deposit

Take whatever deposit they haveCharge a premium interest rate (1–2%

higher)Purchaser pays all outgoingsPurchaser refinances out of the deal when

they can afford to

We Win They Win

We get the house sold at market value or higher

Some cash up front for us

Positively geared property

Purchaser gets in the market and keeps any capital growth

Purchaser doesn’t have to save huge deposit

Purchaser gets to own a home and add value themselves

Win - Win

The Marketing

Over 2 weeks, received about 40 phone calls

This is the exact ad we ran:

The Process

Narrowed it down to 3 applicationsCurrently formalising a deal with a great

couple from NZ with 5 kidsPurchaser recently moved to Australia and

wants out of the rent trapPurchasers have good income but very low

deposit

First Draft Numbers

Sell property for $529k$20k deposit+1% interest rate increasing to +1.75% over

4 years3 points of income:

Deposit ($20k) Positive cashflow ($100 – $170/ month) Back end lump sum when purchaser refinances out

due to loan difference (approx $10k)

Issues To Solve

Purchasers are First Home Owners and only have $13k deposit

Maximum serviceability is $3250/month (not enough for $529k loan)

Properties over $500k for FHO incurs stamp duty which would come out of our deposit

Even More Creative

Purchasers are First Home Owners and only have $13k deposit

Changed Sale Price to $509k with 1 year non-refundable option fee of $20k: $10k up front + $10k

over 52 weeks ($200/wk)

Maximum serviceability is $3250/month (not enough for $529k loan)

$550/wk rent plus $200/wk for 52 weeks plus the $10k deposit gives them the correct deposit

Properties over $500k for FHO incurs stamp duty which would come out of our deposit

New price of $509k reduces stamp duty to $400

In A Nutshell

Purchasers rent the property for 12 months at market rent of $550/wk

Purchasers pay additional $200/wk for 52 weeks as part of an option fee to buy

After 12 months they exercise their option to buy then pay a premium interest rate on the loan

If they choose not to buy after 12 months they forego the $20k deposit and we all move on

Points To Note

We didn’t intend to use Vendor Finance as our strategy but it worked as a good defensive option to preserve asset value in a poor market

This property is classed as “high end” for this type of strategy – more suited to $350k deal

The income is nothing to write home about but I’ll take $150/month positive gearing over $1800/month negative gearing any day of the week!

Networking & Leverage Is The Key

Leverage:The agent found me the dealThe JV partners funded itThe builder renovated itOllie Hooper - Vendor Financed It (www.tvfe.com.au)

Networking & Leverage Is The Key

I couldn’t leverage without networking

These meetings are great to build your team

Everyone I used came from my monthly networking group

The Plug

I run property networking meetings For others to share projects just like this one:

Brisbane Property Networking Group

Sunshine Coast Property Networking Group

*NEW* Gold Coast Property Networking Group

www.PropertyResourceShop.com/events

The Plug

I also run a membership site that includes: Entry to all 3 Property Group meetings Plus audio, video recordings Plus online monthly articles & interviews Plus forums and live news feeds Plus a contact list of pre-qualified, referred Brisbane

professionals and tradespeople

www. PropertyResourceShop.com

MAT T JONES

MAT T@PROPERTYRESOURCESHOP.COM0410 156 312

Thank You