Davo Tries Again

[DaveW]

That's simply not true.

The best you can hope for at time of buying is to ensure the potential for profit.

At the time of buying, the cash flow is all outwards.

Actually before you settle you should always aim to have
1) cashflow inwards
2) delay outwards
3) discounted outwards.

John Bolton achieved one of theee with his pre sales.

[Perry]

No matter what the 'aim' is, the myth (upsell BS) remains the same.

No buyer "make[s their] money at [the] time of buying."

I hereby challenge you to provide any examples of how any PI buyer has more money-to-their-name within an hour after buying, than the PI had before the purchase.

[DaveW]

No matter what the 'aim' is, the myth (upsell BS) remains the same.

No buyer "make[s their] money at [the] time of buying."

I hereby challenge you to provide any examples of how any PI buyer has more money-to-their-name within an hour after buying, than the PI had before the purchase.

We are talking here construction. If John Bolton had pre-sold 90% prior to settling on the land and the vendor left money in the deal then don't you see there's money made before construction even begins ? .

If you're asking an example inwhich investors can make money with buy and holds then a pre-lease of a vacant property allows you to refinance higher than the original purchase price. I.E. you fill a need of a tenant looking to upsize or downsize into a new property.

With commercial property you want to buy add value which allows you to recycle your profit into another property, more typically in 9 months time you can substantial add value.

But if you don't buy right in the first place then you set yourself up for a risky venture. We should be asking why are people buying at market value with no add value in the deal, using their own capital and debt, and then wondering why they can't buy beyond 2 investment properties?

[Perry]

We are talking here construction. If John Bolton had pre-sold 90% prior to settling on the land and the vendor left money in the deal then don't you see there's money made before construction even begins?

Pre-sold does not mean pre-paid, in full. A large percentage of any deposits will be going to the construction company, et al.

A PI does not make money at the time of buying in the implicit sense of having the project's profit in hand/the bank!

[DaveW]

Pre-sold does not mean pre-paid, in full. A large percentage of any deposits will be going to the construction company, et al.

A PI does not make money at the time of buying in the implicit sense of having the project's profit in hand/the bank!

Who said anything about pre-paid in full If you decide to spend the money on construction straight away then that is your decision. If you want cash in the bank from subdivision prior to settling the full amount wth the land owner then that's another choice.

A PI will have profit in hand at time of buying by either realizing the increased equity or assigning to another buyer. YOUR MYTH is in the erroneous assumption that lenders only deal with purchase price.

There are a lot of different angles to commercial property investing which are not available with residential property.

[Perry]

Did John Bolton factor in the costs before settling on the land, perhaps the price of the land needed to be re-negotiated? Did he communicate his intentions with council during a feasibility study before going unconditional purchase of the land? You make your money and setup the plan at time of buying.

Where was commercial Property investing mentioned in the discussion about John Bolton?

You're fudging the matter - at best.

Any money received as in advance, to be paid out on a construction project is not 'making money' in the sense you & others ascribe to that phrase. (I.e. profit)

[DaveW]

Where was commercial Property investing mentioned in the discussion about John Bolton?

You're fudging the matter - at best.

Any money received as in advance, to be paid out on a construction project is not 'making money' in the sense you & others ascribe to that phrase. (I.e. profit)

You're the one who changed the discussion from John Bolton's construction to PI and now back again to construction?

*sigh*

Do you still not see he failed at the buying process ? 8%, are you kidding.
If you can't make money from the first phase of land subdivision and pre-selling the lots then the construction clearly shouldn't had gone ahead. John got himself into a pickle but has learnt from his ways. Whereas it looks like you haven't fully grasped it.

[Perry]

Bolton was constructing residential units - as a form of property investment.

What I fully grasp is:

No PI (of any sort) makes their money (profit) when they buy.

[DaveW]

Bolton was constructing residential units - as a form of property investment.

What I fully grasp is:

No PI (of any sort) makes their money (profit) when they buy.

Residential construction is a commercial activity.

[Keys]

I would venture to say, property investors lose money when they buy. Mostly they gain money when they sell.

[Bob Kane]

"Make money when you buy" is a cute saying by the snake-oil merchants - usually to their victims as they flog off mediocre deals.

[DaveW]

"Make money when you buy" is a cute saying by the snake-oil merchants - usually to their victims as they flog off mediocre deals.

How about "you make your money during due diligence". Is that better, or worse? Or "you set your profit margins and exit strategies during DD".

I would rather not be too direct commenting on John's work he should had known what he was up against with the council. A project that size requires at least 3 months DD, a much bigger margin than 8%, a serious look at outgoings, and a deal structure that minimizes the risks and involves other stake holders. You really need to know what you're doing, many an amateur developer goes broke.

For the record I'm no snake oil merchant and I don't flog off deals. I have been investing in NZ real estate for nearly 30 years, pretty short compared with others but I'm still very much active investing and developing. Along the way I've sought advice with experienced investors which has certainly helped, and yes I do believe in giving back.

I get that a large portion of people remain cynical and that's just human nature.

[Minz]

Land + build will alone set you back $2.5-$3M (quality house)
Council will then bury you in the paperwork(costs)

But seriously can anyone share their experience of building townhouses/Terraces , what is the optimum or min units to make it worthwhile.
I know John bolton build built 11 Terrace houses before the boom and he barely broke even Never again he said. Of course the price has gone up significantly know so have all the costs.

Going through the process right now. Depends on the risk/margin but I couldn’t do it easily with 12 on 1,500 m2...needed to increase density to 14 units (16 units would have been more profitable but would have led to council issues and issues in marketing and/or less than desirable ‘estate’ like environment). i also needed to meet the affordable price range. Seems it can be done for 2K m2 but of course depends on soils etc. land 1m, spend for design etc through to submitting BC is around 400k inc GST. I am mostly hands off due to location. Probably Have to use a procurement based approach to make the margins work. 2.5k m2 kills the project unless you go to a 2nd tier lender and are happy with a low margin (not worth it in my books: no 2nd tiers and no single figure margins for the work involved).

[DaveW]

Going through the process right now. Depends on the risk/margin but I couldn’t do it easily with 12 on 1,500 m2...needed to increase density to 14 units (16 units would have been more profitable but would have led to council issues and issues in marketing and/or less than desirable ‘estate’ like environment). i also needed to meet the affordable price range. Seems it can be done for 2K m2 but of course depends on soils etc. land 1m, spend for design etc through to submitting BC is around 400k inc GST. I am mostly hands off due to location. Probably Have to use a procurement based approach to make the margins work. 2.5k m2 kills the project unless you go to a 2nd tier lender and are happy with a low margin (not worth it in my books: no 2nd tiers and no single figure margins for the work involved).

What is the figures for procurement approach and what are your projected margins ?
Have you already bought the land ?

[Minz]

Yes, I own the land. The figure I have used for the land is the recent independent valuation (ex GST with RC issued). My margin range is 25-30% depending on sale price and assuming I meet the build budget. Currently, we are changing from an ‘all-in-one’ builder approach to procurement. Had a bit of a punch with that where the contractor had indicated all was well with budget only to come in with vastly increased pm2 rates. Have budgeted 2,000 m2 excluding P&G (c220k) and excluding rib-raft foundations (c200k). Numbers show (using the QS and adjusting the inflated contractor prices) that it should meet budget. (All figures ex GST).