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MATT JONES Buy Reno Sell with a Twist. Current Deal… Not What You Think 647m 2 4 bed 2 bath Pool Rear access.

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Presentation on theme: "MATT JONES Buy Reno Sell with a Twist. Current Deal… Not What You Think 647m 2 4 bed 2 bath Pool Rear access."— Presentation transcript:

1 MATT JONES Buy Reno Sell with a Twist

2 Current Deal… Not What You Think 647m 2 4 bed 2 bath Pool Rear access

3 The Beginning Agent called me before it went to market Vacant for 10 years, used as storage after divorce Bought it cheap with a view to Buy-Reno-Sell Engaged a builder to do all the work Brought in JV partner to fund the deal

4 Cash Out Cash In Purchase Price $342k Purchase Costs $13k Reno Costs $90k Hold Costs $10k 7%) Expenses - $455k Sale Price $510k Minus  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)

5 Before After Street View

6 Before After Living Area

7 Before After Kitchen

8 Before After Dining Room

9 Before After Bedroom

10 Before After Main Bathroom

11 Before After Backyard & Pool Area

12 Adding Value - New Ensuite

13 Adding Value - New Deck

14 Cash Out Cash In Purchase Price $342k Purchase Costs $13k Reno Costs $120k Hold Costs $15k (6 7%) Expenses - $476k Listed Price $539k Minus  Agent $16k  Staging $2k  GST $9k Net Sales Proceeds - $512k Actual Numbers Expected Profit $36k (More Potential Profit But No sale)

15 So Far No Sale Debt was growing and eroding profit Market dropping Market sentiment poor Brought in another money partner to cover extra costs

16 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!

17 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 have Charge a premium interest rate (1–2% higher) Purchaser pays all outgoings Purchaser refinances out of the deal when they can afford to

18 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

19 The Marketing Over 2 weeks, received about 40 phone calls This is the exact ad we ran:

20 The Process Narrowed it down to 3 applications Currently formalising a deal with a great couple from NZ with 5 kids Purchaser recently moved to Australia and wants out of the rent trap Purchasers have good income but very low deposit

21 First Draft Numbers Sell property for $529k $20k deposit +1% interest rate increasing to +1.75% over 4 years 3 points of income:  Deposit ($20k)  Positive cashflow ($100 – $170/ month)  Back end lump sum when purchaser refinances out due to loan difference (approx $10k)

22 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

23 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

24 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

25 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!

26 Networking & Leverage Is The Key Leverage: The agent found me the deal The JV partners funded it The builder renovated it Ollie Hooper - Vendor Financed It (www.tvfe.com.au)

27 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

28 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

29 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

30 MATT JONES Thank You


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