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3 Options! Sell as is? Build and sell? Build-Buy-Hold?

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  • Baldy
    replied
    Originally posted by charlotte30 View Post
    You can reduce the rent below market value whilst informing the tenant that building is imminent. Rent to working people who are away most of the day when construction is going on. You will be dealing with neighbours either way, your tenants and/or other owners. I have built behind my houses and built blocks of apartments. In my experience builders radios cause the most problems. Most building noise is intermittent and is within a specific timeframe. Charlotte30
    Thanks Charlotte30,

    Appreciate your advice much more now that I know you have all this experience.

    Cheers,

    Leave a comment:


  • Baldy
    replied
    Originally posted by rosco View Post

    i would suggest getting a couple of property managers in to get rental appraisels and also to discuss how easy it would be to rent 4 at once.

    This applies more to selling, but often you can stick up a sign up during construction (new 2 bedroom unit ready to rent in october), and hopefully get a tenant throughout the process. Might get a friend or family member from your existing neighbours. This idea costs very little, but often works quite well. Plus if it doesn't you go through normal rental ideas in the last month or two.

    Ross

    Thanks again Ross,

    Another couple of good ideas!

    Cheers

    Leave a comment:


  • Rosco
    replied
    Originally posted by Baldy View Post
    Thanks Ross,

    There is another risk... having 4 houses to rent out at the same time... etc.

    Wish us luck!
    Baldy
    What area are you in? If it is a major city and in a good area near universities or hospitals or centre of city, then renting shouldn't be too hard. But if you are in a smaller town, you might find this quite awkward.

    I would suggest getting a couple of property managers in to get rental appraisels and also to discuss how easy it would be to rent 4 at once.

    This applies more to selling, but often you can stick up a sign up during construction (new 2 bedroom unit ready to rent in October), and hopefully get a tenant throughout the process. Might get a friend or family member from your existing neighbours. This idea costs very little, but often works quite well. Plus if it doesn't you go through normal rental ideas in the last month or two.

    Ross

    Leave a comment:


  • charlotte30
    replied
    You can reduce the rent below market value whilst informing the tenant that building is imminent. Rent to working people who are away most of the day when construction is going on. You will be dealing with neighbours either way, your tenants and/or other owners. I have built behind my houses and built blocks of apartments. In my experience builders radios cause the most problems. Most building noise is intermittent and is within a specific timeframe. Charlotte30

    Leave a comment:


  • Baldy
    replied
    Thanks Charlotte30,

    That's a good idea. My only hesitation is that a staged approach may frighten away 'good' tenants?

    Does anyone on PT have any personal experience/stories about 'good' tenants who have tolerated a construction site next to them? I would personally not like to rent in this situation! I imagine we will be expected (ethically and legally?) to let the tenants know that this is the plan when we rent out the first duplex's? Perhaps to even offer a discount on the rent during the second construction phase?

    Basically we would love to do them in one hit if we can get a bank to lend us the full project costs in a mutually acceptable deal.

    Wish us luck!
    Baldy

    Leave a comment:


  • charlotte30
    replied
    Dear Baldy I would take option C but reduce the risk by doing the duplexes one at a time. Then rent them out before starting the other duplex. It will help with cashflow and gain equity for further borrowing. Put your services in for all the units as it is more cost effective. By keeping all the units you will build greater equity for the next project. Charlotte30

    Leave a comment:


  • Baldy
    replied
    Thanks Ross,

    Appreciate your feedback. You're probably right about option B. It is on the optimistic end of the continuum.

    We will probably go with option C since it ticks our long term objectives... even though there will be risks... like delays during the build period (we calculated a 4 month holding cost). There is another risk... having 4 houses to rent out at the same time... etc.

    Wish us luck!
    Baldy

    Leave a comment:


  • Rosco
    replied
    Also your figures in B seem a little too good!

    Leave a comment:


  • Rosco
    replied
    You seem to be comparing different things and maybe haven't included all the figures. How I understand your figures

    A- $180k cleared
    B- Mortgage free, so $260k, plus make $120k? So $380k all up?
    C - How do you get the family home mortgage free? You aren't making any cash to repay the loan? If you borrow more than the cost of the project, generally this won't be tax deductible, so you would still have a mortgage on your family home from a tax perspective.

    I would personally be looking at Option C. Based on your figures in B, and taking out the tax and GST costs, then you should be adding at least $500k in equity. You say that duplex's would be cashflow positive, so your are creating huge equity plus good cashflow. Based on what you have put, this seems a pretty good option.

    Option A is easy. It should happen pretty easy and presuming you already have the resource consent, it should pretty much be guaranteed money.
    With option B and C, you will always find there are extra costs (like for example have you factored in interest costs while you build) and the project can take longer then you expected. Rents or selling prices also can be less than expected.

    Ross

    Leave a comment:


  • Baldy
    started a topic 3 Options! Sell as is? Build and sell? Build-Buy-Hold?

    3 Options! Sell as is? Build and sell? Build-Buy-Hold?

    Hi PT People,

    Thanks for taking the time to read this and for sharing your knowledge and goodwill.

    We have 3 options on our property project. We want to decide on one option and move ahead asap. We do understand that as this is our project we are responsible for what we do! I suppose our biggest goals are to create a retirement fund and to gift our kids with an inheritance. Cashflow would be pretty good too! And no mortgage on the Family Home would be great!

    Option A
    Sell the Family Home with a Resource Consent to Build two duplex on our section (total of 5 titles). Clear a Profit of 180 K with no tax or gst applicable. And use this money for another project?

    Option B
    Build the Duplex's and sell them individually after completion for a rough profit of 120 K after all expenses and gst and tax etc. Plus get our Family Home (worth 260 K) mortgage Free!

    Option C
    Build the Duplex's and Rent them out for our Long-Term-Buy-and-Hold Strategy. Clear a positive Cashflow of 12 K per annum after all fixed expenses, using the interest rate of 6% on total projects costs which will be borrowed. Plus we get the Family Home (worth 260 K) mortgage Free!

    Thanks for your input.
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