Monthly Archives: January 2014

Brisbane Housing Market Article 28-1-14

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The Brisbane housing market continued on its slow but steady recovery though 2013 with the median house price set to increase by up to 5 percent.

Although this will clearly be the best annual result since 2010, Brisbane house prices will, nonetheless, remain around 5 percent below their previous price peaks of over three years ago.

Buyer activity was strongest in the mid-price range, inner and middle ring suburbs to the north, north-east and south-east of Brisbane.

The Brisbane housing market will continue to move solidly though recovery mode in 2014 as the Queensland economy reactivates through a lower dollar environment.

An improved economic performance was evident at the end of 2013 with the local unemployment rate trending down to below those of Sydney and Melbourne where trend unemployment is rising.

Falling unemployment, population growth from southern job seekers, increased house investor activity chasing high yields, rising rents and rising prices together with ongoing perceptions of value buying opportunities in the mid and upper-price ranges will continue to drive the Brisbane market.

Brisbane house prices will increase by 5 to 7 percent in 2014, to finally recover to the previous peak levels of 2010.

Median-change-in-house-prices-BrisbaneMedian-property-price-Brisbane

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66 SPRINGFIELD DRIVE Burpengary | House | For Rent @ domain.com.au

L J-Gilland-Real-Estate (2)66 SPRINGFIELD DRIVE Burpengary | House | For Rent @ domain.com.au.

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Capital growth ‘not a given’: expert

Capital growth ‘not a given’: expert.

L J-Gilland-Real-Estate (2)

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Rental yields keep pace with price growth

Rental yields keep pace with price growth.

L J-Gilland-Real-Estate (2)

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What is an offset account & should you get one?

L J-Gilland-Real-Estate (2)

What is an offset account & should you get one?.

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Generaly things do work out!

Somewhere along the line, we got the idea that life was supposed to be perfect.

When things are anything less than perfect, we all moan and groan. I’ve had a revelation this year where that is concerned and in the process, I have learned that when you just take a deep breath and learn to go with the flow life is so much easier and so much more pleasant. Besides, we usually can’t change the situation anyway. And with real estate investing, “There’s always something”.

Imperfect Is the New Perfect

I have also come to the conclusion that “imperfect” is actually the norm. It is how we deal with all of these imperfections that ultimately will determine not only our success but our happiness and our state of mind. When things seem to blow up in our face we get to choose how we react. And it is during those times that the people on our team get a close look at how we conduct ourselves and how we do business.

My Last Closing of the Year

I had a closing the last week of the year that should have taken less than 30 minutes. This process ultimately took about 5 days before it was finally complete and I had a check in my hand. As a general rule, closings go pretty smoothly in my world. Since most of my closings are double closings or “simultaneous closings” there is always the risk of “double the trouble” right from the beginning. My closing attorney (and his staff), are some of the most important members of my team. Whenever a problem crops up they just take care of.

My sellers in this transaction were two sisters that were residing in different states. One of the sellers actually lives in my city, but had gone to Florida for the winter. This house was part of an estate and the way this had been set up both sisters had to sign the paperwork. My closing attorney sent all of the necessary paperwork to the sisters with instructions to return it to his office.

Simple enough right?

One of the sisters did exactly that. She returned the documents in the overnight envelope that was provided. The other sister mailed the paperwork to the probate attorney who never bothered to forward the documents to the closing attorney. The day of the closing, we were still missing the documents. So they got the probate attorney on the phone to let him know someone would run over to his office to pick up the missing documents.

This is what he said; “I’ll have to see if I can find the paperwork, and we are closing early. We plan to leave the office at 12:00 today”. Was anyone there when the courier arrived? Nope. No one waited for him.

Problem Number Two; Insurance

My buyer was using a local bank for his construction loan, so he needed proof of insurance. As soon as the house was under contract he promptly called his insurance agent. After leaving numerous messages with both the insurance agent and the company itself, he still didn’t have the insurance binder on the day of closing. In fact he had nothing but a bucket full of excuses. The insurance binder finally came several hours after the start of the closing, but not before we had all gone home.

The Check is Made Out to Whom?

As I said, this particular buyer was using one of our local investor friendly banks. They were ready to close in about 7 or 8 days from the date of the accepted contract. I was really impressed by this and also with the man who represented the bank. While we were waiting for everything to get sorted out, we spent time talking about customer service and the benefits of working with small, local businesses.

At one point he looked in his folder and stared at the check. He held it up and said, “I’m not sure how this happened, but the check is made out to the wrong attorney. I will have to arrange for a wire transfer.” All we could do was laugh.

Get Mad or Get Over It?

Two hours after our 9:30 am closing began we all packed up and went home. What we had was a dry closing. The documents were signed, but we were still lacking:

  • The missing signed documents
  • The insurance binder
  • The wire transfer

Since the offices were closed on New-Years day, roughly 5 days after the start of this process we were finally finished. My last closing of the year ended up being my first check of the New-Year.

As you can see, things generally work out in the end.

L J-Gilland-Real-Estate (2)

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To Syndicate or not to Syndicate?

To Syndicate or Not – This is The Question (What Would You Do?)

Syndicate or Not

Indeed – this is the question I need answered.  As you can imagine, I am leaning in one direction in this matter, but I need you to check my thorough process and offer an opinion.

My answer – an emphatic YES.The next deal that I do is going to be a syndicate.  My feeling on this stems from the success I’ve had creating equity and cash flow with small multiplex, and now I am ready to add a “0” or two to every number in the deal.

To clearly define the moving parts, allow me to update you as to the status of the Symphony 10-Unit.  I wrote about it in an article entitled How I Bought a 10-plex With 1.5% Down – Case Study.

Acquisition Numbers

Purchase Price:                                                            $373,500

1st Mortgage (commercial portfolio note):                  70%

2nd Mortgage (private note):                                        25%

Required Down-payment:                                          5% *

Monthly Gross Income:                                              $5,800

Monthly Operating Costs:                                          $2,400

Monthly NOI:                                                             $3,400

Cost of Money:                                                           $2,400

CASH FLOW:                                                          $1,000

CAPITALIZED VALUE                                         $408,000 **

EQUITY POSITION                                               $54,000 ***

Several points here:

  1. While the down-payment requirement was 5% ($18,675), after prorations and credits I ended up closing with about $5,300 out of pocket, and this was the first ever deal that I brought money to – bummer…I couldn’t sleep over it for days!
  2. A building such as what this is in the location it is in commands a 10 CAP.  Therefore, annual NOI of $40,800 ($3,400 x 12) justified a value for this building of $408,000 at 10 CAP.  Having paid $373,500 I received a bit of a discount against the capitalized value.
  3. The total outstanding debt on this building was, and still basically is about $354,000.  Juxtaposed against capitalized value of $408,000, my equity position at the outset was about $54,000.

Improved Numbers

I evicted bums, hiked rents, and lowered expenses.  Due to my efforts, the current monthly NOI is about $3,870.  My current Cash Flow on this building is roughly $1,500/month, and the annual NOI $46,500 justifies a value of a bit under $465,000 at the same 10 CAP.

Thus – I’ve managed to drive the Cash Flow up by 50%, and my current equity position is $111,000:

Equity Position = Capitalized Valuation – Outstanding Debt

Equity Position = $465,000 – $354,000 = $111,000

A Bit Of Perspective On Syndication

My desire and pretty much decision at this point, to syndicate comes from a simple mental exercise of adding a “0” to every number in this transaction.  Of course, in this case I’d be talking about buying 100-unit apartment community for $3,735,000 with initial Cash Flow of $10,000/month and improving that to $15,000/month, and in the process putting a million bucks on my balance sheet.

I am aware that the process, though more involved and expensive, is basically the same.  So, in lieu of playing with tens of thousands as we do in SFR, or hundreds of thousands as we do in small multi, I would much rather syndicate and play with millions – the game is the same…

What am I missing? Thoughts?Image

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