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Buy Reno (Cosmetic / Quick / Early Acess) and sell in todays market - debate me !!

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  • Buy Reno (Cosmetic / Quick / Early Acess) and sell in todays market - debate me !!

    Just how hard is it to sell discounted property at the moment ?

    I am at the moment debating with my wife, my broker, my solicitor, myself, and opinion from experts such as Sean Levy, Dean Letfus.....

    That now is not a good time to do trades ???

    By trade what I actually mean is quick cosmetic reno and sell where the work is finished before or close to settlement day.

    The theory being, to buy well (very well, 20 to 30% below current RV) and add value through cosmetic reno, have early access and reno done within 2 weeks.

    The hooks in todays market as stated to me:

    1. Take too long on reno, overspend on reno, buy too high, market falls further while getting ready to sale - I think these issues I have eliminated to an extent.

    2. Cant sell or takes too long to sell. This is the issue detailed to me in detail by lots of people - But If I have implemented my plan correctly, havent I minimised this. If I have bought well, added value, and wish to sell below the new RV by 10% to 20%.

    Or is the market still dangerous enough that prices drop further or I just cant sell (So plan B is to hold in your Trading Trust or plan C sell to a hold entity).

    So why is this market so bad to be doing what I am looking at doing ?
    Obviously a strong and liquid property market can hide a multitude of investment mistakes.
    But isnt a slow market a great time to be able to buy very very well, you may take a lot longer to sell, but shouldnt you be able to make more money per reno than in a market that is strong ?

    P.s. I want to add value through work and not just assign, trade or double settle. And yes I also want to buy to hold as well if the figures stack up.
    This reno trade thing is an idea to compliment holds.

  • #2
    Depends entirely on the property. I am certain it is a workable scenario if you get the right property at the right price. You just need to find it. Again (from a different thread), my advice is to identify who will buy this property off you at a premium. Will it be an investment property of an O/Oer. If the former simply the numbers have to stack up (well!!) ie re-tenant at a good return (certainly no -CF if you want to sell fast), if the latter factor in current lending criteria - ie I imagine a low/mid price range will suit you best.

    This highlights the 'wisdom' of alot of the property mentors that operate. First they buy cheaply from inexperienced owners that have found themselves in some difficulty (see Sean Levy (sorry 'property trading tycoon' and Housedeals site)) then either improve or just offer these up to their database of inexperienced property investors who will happily take these off their hands for a profit. You have a pool of potentially desperate vendors and greedy, swayable purchasers. Win/Win easy money for them. Don't even know if I could call it unethical (I couldn't do it), just hope they pay taxes on any CG.

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    • #3
      Better off to just onsell any renos/deals to someone else and take a smaller profit
      Nigel Turner

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      • #4
        All comes down to your rules and ability.

        There are always people looking for good property to buy who don't have the time or inclination to find them for themselves.

        If in doubt don't do it in this market but there is certainly opportunity to trade property yes.

        Your particular idea of doing reno's and onselling would be one of the least preferable strategies at the moment in my opinion becaue you are limiting the buying pool to people who want to pay retail with no opportunity to add value.

        I would be finding reno's and onselling to investors who want to reno and hold myself.

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        • #5
          You would need deeeep pockets and wiiiide margins to trade property right now.
          You can find me at: Energise Web Design

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          • #6
            Originally posted by drelly View Post
            You would need deeeep pockets and wiiiide margins to trade property right now.
            Why is that Drelly ?

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            • #7
              Depends on your definition of trade Drelly.
              Making 5 or 10K finding a property for a preapproved buyer doesn't require either :-)

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              • #8
                Because of...

                Originally posted by Bluekiwi View Post
                2. Cant sell or takes too long to sell. This is the issue detailed to me in detail by lots of people - But If I have implemented my plan correctly, havent I minimised this. If I have bought well, added value, and wish to sell below the new RV by 10% to 20%.

                Or is the market still dangerous enough that prices drop further or I just cant sell (So plan B is to hold in your Trading Trust or plan C sell to a hold entity).

                Comment


                • #9
                  BlueKiwi - Lots of reasons.

                  - reduced numbers of buyers
                  - longer times to sell
                  - increasing unemployment
                  - tighter lending criteria
                  - increased cost of living

                  Probably lots more but those came to mind. What ever the margins and cash on hand any trader required a year ago, those obviously need to be increased now unless that trader is prepared to accept greater levels of risk in a worse economic climate, which would be a bit crazy to me.

                  Dean, true but I'm really referring to settling without a pre-arranged buyer.
                  You can find me at: Energise Web Design

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                  • #10
                    Dean, true but I'm really referring to settling without a pre-arranged buyer.
                    In this market the technical term for that is masochism, not trading :-)

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                    • #11
                      INHO The Only way to trade safely is to purchase a property that will not cost you any money to hold at a big discount and in area with high demand.

                      and probably a property under 400k. as more people can afford this price range.
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                      • #12
                        Originally posted by drelly View Post
                        BlueKiwi - Lots of reasons.

                        - reduced numbers of buyers
                        - longer times to sell
                        - increasing unemployment
                        - tighter lending criteria
                        - increased cost of living

                        Probably lots more but those came to mind. What ever the margins and cash on hand any trader required a year ago, those obviously need to be increased now unless that trader is prepared to accept greater levels of risk in a worse economic climate, which would be a bit crazy to me.

                        Dean, true but I'm really referring to settling without a pre-arranged buyer.
                        Thats lots of reasons to be able to bargain a fantastic purchase price in such a bad market.

                        So its "only" price and time to sell on the other side is the issue, even at 20% below RV ?

                        The difference compared to a strong market is simply the liquidity ?
                        And potential to be stuck with the property for a,ong time and have the market drop further.

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                        • #13
                          Originally posted by Josko View Post
                          Because of...
                          Houses are still selling, although about 50% of boom levels.

                          Cant you buy at 30% under and sell at 15% under RV.

                          With a quick cosmetic reno to make it sell quickly ?

                          Comment


                          • #14
                            Housing may still be selling, but I'd be wary of the time it takes to sell. Buyers are constantly being told how it's a buyer's market and to take their time looking for just the right place.

                            Comment


                            • #15
                              Originally posted by Bluekiwi View Post
                              Houses are still selling, although about 50% of boom levels.

                              Cant you buy at 30% under and sell at 15% under RV.

                              With a quick cosmetic reno to make it sell quickly ?
                              Blue, if you are confident of its conservative value, I don't see how buying 30% below and selling a little below a conservative RV wouldn't work (unless you hold on for ages and the prices drop substantially).

                              However, how confident can you be in the RV, and if it's conservative how likely is it that you will be able to secure a 30% discount on it (especially in a popular, liquid spot such as up on the Shore, where I assume you'd prefer to buy)?

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