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