My First Deal - Yippee!!!

[SuperDad]

Hi Neo,

I've had a bit of a dig, and I've found some contact details for the Waikato PIA.

The association meets every second Wednesday of the month - the next meeting is July 12. That meeting happens to be a bit of a bigger event than normal - Noel Whittaker is coming over from Australia to talk. (I'm not actually sure who Noel Whittaker is, but I'll find out before the next meeting.) I think 200-300 are expected for that meeting. The normal numbers look to be around 150 attendees each meeting. For the next meeting I know that the organisers (contact details below) are taking bookings, so if you want to come along you'll need to book. (RSVP by July 10th)

I joined a couple of months ago, and it has been worth every cent so far. The $200 annual membership entitles you to a free subscription to NZ property magazine, together with an excellent discount card. My first trip to Placemakers with my card saw me get a $100 discount, so together with the magazine subscription it has already paid for itself.

But even if there was no magazine subscription and no discount card, I would happily pay $200 per year to belong to the association. The combined property knowledge floating around at any one meeting is phenomenal.

I'd love to see you along there - send me a PM if you're going along, and we can meet beforehand at the venue for a drink or even a meal.

Meetings are held at the Kingsgate motel and conference centre, just of Te Rapa Road in Garnet Ave. PM me if you need directions.

Here are a couple of contact details for the PIA:

Brian Hancock (07)8490332
Michele Coker (07)8548981

One of these two should be able to give you more info.

I look forward to meeting you,

Paul.

[Neo]

Thanks for that information Paul, I will contact either Brian or Michele tomorrow and have a chat with them.

I will touch base when I know what is happening with babysitters etc. It will be great to get back in the ring with other property frenzied people.

Thanks again Paul,

Neo

P.S My e-mail address is [email protected]

[NZGEMS]

HI Paul
I have just read through all the posts on here, interesting thread, a couple of thoughts that have not come up, although at least you will be able to claim it back, is the 8.5% management fee including GST or plus GST? normally they are plust GST so you will be paying 12.5% more than you thought, check with them though it could be including in which case you will claim a 9th of the fee back,
If you are taking it vacant are you sure they will tenant it again quickly? Is it worth keeping some of the tenants, you can always go in and negotiate a new rate with them perhaps it is worth putting up the board $5 or $10 a week. Just because you take vacant possesion doesnt mean they have to move out, you can check them out and pick the ones you keep, I have done this on many occasions.

and as to those not buying at present there are always deals out there if you beleive it, I have bought 3 this week, and next week I may well get another couple if my offers are accepted.

I agree witht the LMI it is to protect the bank but I used it several times when starting out because it ment less in the deal and if you plan to buy lots it is worth paying beleive me. You get a far better return on your money or equity than if you had put 20% down. Think outside the box people. Or climb out of it there are lots of wonderful deals on the other side.

See you there.
Robyn

[SuperDad]

Hi Robyn,

Geez, you think you've triple-checked everything and you forget the GST on the management fees!!! Thanks, I've adjusted my figures accordingly. All of the advice I have received (legal and accounting) strongly supports my view that the property will not attract GST, but I'll be claiming the 1/9th of fees back if it does.

Regarding vacant possession - I had the same thought as you. I will take vacant possession, but if there are one or two good tenants willing to stay on under new contracts, then that will be good. The house is such that it can be renovated in two sections, front and back. The tenants could shift from one end to the other as the renos progressed (this would be specified in their agreement). This would have two advantages: a little cashflow for the two weeks renos are being completed, and someone on the premises at nighttime for security purposes. Otherwise I would be sleeping over for two weeks. This wouldn't be so bad, as I would only be doing the painting from 4pm onwards, after my wife is home from work. I would still be home in the morning to get the kids ready for school/kindy, and the wife ready for work!

I'm a big fan of the LMI at this stage of my investing - it gives my wife and I a healthier LVR on our PPOR.

See you there (in your brand new secondhand Beemer),

Paul.

[xris]

...regarding vacant possession - I had the same thought as you. I will take vacant possession, but if there are one or two good tenants willing to stay on under new contracts, then that will be good.
Paul.

Paul,

What if they all decide to go and refuse to accept your new offers? Wouldn't that put a spanner in the works of your calculations, especially seeing as you intend to renovate immediately thus creating a visual impediment for any potential replacement tenants.

xris

[SuperDad]

Xris,

I have not budgetted on any cashflow from tenants being in situ over the renovation period, so no problems with my calculations there. My main reason for preferring that at least one tenant stay on over the reno period would be that I would not have to sleep on site each night. But I'm quite happy to do that if need be - rather that than have the house ransacked.

Paul.

[xris]

Fair enough.

[SuperDad]

Xris,

As always, I appreciate your comments. Keep 'em coming -it keeps me on my toes, and makes me make sure I have thought through the possibilities on this purchase.

very best,

Paul.

[Monid]

Alright I'll step into the questioning shoes... Have you factored in the holding costs while you are renovating as an expense?

I only ask because this was probably the biggest factor we neglected when we did our first renovation and one reason that I now prefer to use professionals when I can (And when they can do it promptly...) We saved a fair bit on the up front costs of renovation by doing it ourselves, but then spent pretty much that amount on holding costs because we were much slower than trades people...
Then again unlike you we lived in Auckland but bought in Rotorua, and since we were both working we only had the weekends to renovate on.

Something to watch out for though.

David

[SuperDad]

Unconditional today???

Hi all,

Today is the unconditional date for the cash cow.

Yesterday I hit a bit of a snag, which I am trying to work around. When I was going over the CT with my lawyer she pointed to the outline of the house on the CT and asked "does this match the dwelling as it currently stands". I had a look at the footprint picture and said "No".

My lawyer said "You have a big problem."

I kept smiling. I asked her what the problem was.

She told me that according to clause 5 (and especially 5.3) of the S+P agreement, the fact that the actual external dimensions differed from those on the CT constitued a requisionable item. My lawyer also informed me that there will likely be a problem borrowing for the property, as the security offered to the bank as recorded on the CT differs from the physical security (the actual house).

I kept smiling. I asked her why this had happened.

She told me that many owners of houses on crosslease titles don't bother to get their houses resurveyed when they complete changes to the external footprint of the house, and so this information is never lodged with LINZ. She told me that the cost to rectify might be in the vicinity of $7-8K. I'm still smiling at this point, even as my lawyer says that I have my back up against a wall. I remind her that I am in no such position - I can still walk away from the deal by invoking the solicitor's approval clause. My wife later told me that she was getting worried at my cavalier attitude by this stage.


I explained to my wife that I was smiling all along because I was genuinely not worried. Why? Because I think that there are two kinds of challenge in life. The first kind are the ones that can be overcome with a little hard work, and a bit of creative thinking. There is no point worrying about these kinds of challenge - one just needs to get stuck in and sort them out. The other kind are the ones we cannot do anything about. It's not worth worrying about those kinds of challenges - one can't do anything aobut them, so you might as well keep on smiling As regards this latest issue, I'll hopefully know by lunchtime which kind of challenge it is.

I now have a written estimate from a surveyor putting their costs at $5500. Legal costs and bank redoc fees on top of this do bring the cost to $7K. We haven't yet gone back to the vendor to request a reduction in price, as I'm still trying to work through or around this latest snag. I will need to find out whether the bank will lend in this situation. If they won't there's no point in asking for a price reduction. I will have a valuation on the property coming in this morning, so this should support my case at the bank (as long as the valuation is more than the purchase price!!!) BTW, the house has been bought and sold 3 times over the last 6 years on the defective CT, seemingly without problem. So I'm hoping that I can find my way through this snag today.

Another small hitch - when my lawyer and I found out about this problem at 10.30am yesterday, she phone the vendor's solicitor. He is currently on holiday for a week. The vendor is also out of the country for several weeks - he was on a plane to Singapore yesterday. I met with the vendor's son, who has power of attourney, yesterday afternoon. He is awaiting to inform his father of this hitch, and to receive instruction.

In the meantime, if anyone has any experience borrowing on a property where the CT is defective in this way, I'd love to hear your story - good or bad.

Best,

Paul. (Still smiling!)

[xris]

Hello Paul,

I will try to comment a little later this morning when I have more time, but it concerns me that you seem to be willing to buy a property with an apparently defective title.

xris

[SuperDad]

Hi Xris,

Thanks. I'll be working hard today to find out how defective the title is. As far as I can tell, its a minor defect - nothing that money (vendor's money) can't fix. My main concern is on the finance side of things - will the bank be willing to lend on the title?

Paul.

[BusyLizzy]

Hey Paul,

Just be careful with this.... always keep in mind your exit strategy as well. What if you needed to sell due to change of circumstance? This 'defect' could put buyers off, thereby reducing your potential market.

Same goes with purchasing non-permitted places....

Just something to think about... as I am sure you are!

[mals69]

Paul aka Superdad

Is today the big day ? Love to hear how you got on ?

[xris]

Hello Paul,

This will not be at all detailed owing to a busy schedule but some quick thoughts follow.

If the title issue is not resolved, do not settle. (Normally I would ramble on here but time does not allow this. Speak to your lawyer and take advice accordingly.)

Sold three times in six years? Doesn’t that tell you something? Be careful – it does sound a little like you may have been hypnotised by the figures, by this site, and by the desire to be doing something to join in the fun.

If you have got a clause which says simply: ‘this offer is subject to lawyer’s approval’ then it is not really worth the paper it is written on. This has been tested many times in court, so don’t fall into that trap. For the benefit of others, this common practice may be a waste of time. The clause needs to be tighter and more specific. The lawyer will need a genuine reason to avoid confirming the contract, not just because you have changed your mind. This can easily be done by being a little more specific in the detail of any such clause, something which may apply in your case.

xris