First trade under contract!!

[FreezingandHot]

Hi All

After long hours and endless searches I have finally got another IP under contract. The intention is to renovate this property and sell, my alternative if the property does not sell for what I want, is to hold for a while to rent out and sell when summer arrives to capture larger buyer numbers. I would just like to ask you all what steps
I should undertake next to trade this property.

I own another rental under an LAQC business and do not want to taint this entity, I am aware that I need to speak to my lawyer to set up separate entity to trade this property and also before it goes unconditional in 2 weeks, also I have yet to get my finance sorted but have pre-approved finance conditional on a RV on my own residence so dont see too many problems there.

Here is my next plan of action:

1.Talk to broker to confirm finance
2.See lawyer to set up trading entity
3.Source materials for renovations
4.Celebrate the fact I have brought another IP

If there is anything any of you "Traders" can think of that I need to do extra for my plan of action, can you please advise as I am sure there are a number of other things that need to be done for this to progress.

Thanks in advance.

FH

[SuperDad]

Hi Patrick,

Well done. I think you will also need to GST register the trading entity, so that you can claim GST on purchase. If you don't do this, you will still be liable to pay GST on sale.

I don't know how long this takes to do. I would recommend you move quickly on setting up the trading entity - my wife and I are about to do this and Garth Melville's office has told us that they like 10 working days in which to do this. It can be done quicker, apparently, but it might attract extra costs.

Would you mind telling us a bit more about the deal - purchase price, current value, budgetted reno and holding costs, projected value after renos, etc? As a newbie I find these figures both useful and interesting. I've heard that there is not much meat in trades at the moment - I'll be interested to see your projected profit.

Paul.

[drelly]

Paul's right about the GST. This has to be done before going unconditional.

[FreezingandHot]

Yes I have an appointment with Garth Melville today, wish me luck!!

FH.

Will keep you posted on how this trade is going, I want to take pictures and post as drelly has done.

[FreezingandHot]

Hi Paul

Thanks for the advice also, I will post the details of this deal shortly as I need to go into specifics on how much I think the renos will cost. As the contract was only signed yesterday anything can happen and the deal might fall over.

Will keep you posted as things progress.


FH.

[SuperDad]

Thanks FH, and good luck with the deal. (I'm not sure whether it is bad form to wish an investor good luck - perhaps we should say something like "break a window!")

Paul.

[FreezingandHot]

How about GOD speed!!

FH.

[SuperDad]

FH,

I'm not sure about the "GOD" bit, if it is meant to be taken literally. Maybe plain old "good luck" will do it.

Paul.

P.S. If you show me your's, I'll show you mine. My wife and I are working hard for our first deal, so when we make it happen (and I'm not waiting to "find" a deal, or for a deal to "come along" - we are going to have to make one) I'll share all the juicy details.

[Dean@Massiveaction]

Hey Pat. Under NO circumstances can you go unconditional until your trading trust is formed AND GST registered. If you can't get it sorted prior to unconditional you will have to drop the contract and start again. THIS IS NOT NEGOTIABLE. If you don't do this you will get done by IRD when you get your first refund.

[Heg]

Hi FH

Hey Pat. Under NO circumstances can you go unconditional until your trading trust is formed AND GST registered. If you can't get it sorted prior to unconditional you will have to drop the contract and start again. THIS IS NOT NEGOTIABLE. If you don't do this you will get done by IRD when you get your first refund.

Second post today when I have agreed with Pooomba - must be going soft
Seriously though - he is right - DO NOTHING until everything is in place.

[NZGEMS]

HI FH
with your do up costs make sure you estimate higher than you think they will be and allow to sell a little lower than you think then if the numbers still work it is sweet to go. I always like good surprises so I like to estimate a little high.
Good luck. Robyn

[FreezingandHot]

Hi All

I went to see Garth Melville last Friday for a consultation and he was very helpfull explaining everything. His company can set up the structures before I go unconditional so there is no problem there, I am however a little concerned about the costs involved with the renovation and conveyancy costs. All these together add up to around 20k on top of the purchase price and I am getting concerned about making this money back when it is time to sell.

Is this a normal reaction at this time in the deal?

FH

[SuperDad]

Hi FH,

While I haven't yet done any trades, I've read a lot!

From what I've read, I'd say your reaction is normal. You need to find out what it is a reaction to, though. Is it a reaction to the fact that the numbers don't stack up - maybe the profit margin is starting to look a little thin after the $20K reno costs are factored in? maybe your subconsciously (or even consciously) concerned that in the current market you might be left holding the property longer than oyu want. If this is the case, then the concern is well grounded - the warning bells are sounding, so take heed.

Alternatively, it could just be the normal concern/nervousness that goes with any big decision in life. If the numbers stack up, and ou've double and triple checked them, then the problem is not the deal but your fear. As I've had said to me, you need to "build a bridge and get over it". (I don't mean this in a disparaging way.) There was a good thread a while back, started by MaryJ, about conquering one's fear.

Best wishes,

Paul.

[FreezingandHot]

Hi Paul

Yes I think fear is starting to set in as unconditional day draws closer (22 June), I have a good feeling about the property and my ability to make the deal happen where I make some profit, but I hear the warning signals going off in my head and the doubt starting to creep in as the time draws forward, I have a due dilligence clause to get out but I need to think decisively & clearer about this in the next few days.

I think as this is a trade and not a buy & hold I have different fears as I am more confident with the buy & hold strategy because I know that If the property was not getting tenants for whatever reason, all you would have to do is drop your rent to rent it out.

A bit different if the property is not selling.

FH.

[cube]

all you would have to do is drop your rent to rent it out.

A bit different if the property is not selling.

No, not really - all properties have a price, and dropping your sale price is always an option.

What you don't want to do is to become a 'D' - desparate to exit the property at any cost.

Plan to fail - decide now how long you can hold the property for sale before taking it off the market, and renting it out for 6 months or a year.

cube