All Forum Posts by: Andrew O.

As far as doing research on an area, I enjoy browsing through www.city-data.com

Andrew

Hi all,

Been awhile since I was here, happens when you should be looking for the next deal, but the money is flowing. I have contacts and investments in a particular business model in Australia, returning ~20% net (downside being exposure to a somewhat volatile currency) plus capital gains.

The model involves the rights to manage hotels/ vacation apartment rentals/resorts. So a developer builds a hotel, sells the units, and as an extra kicker sets an agreement that all the units must be managed by a separate management company, and sells that right to manage. Whoever buys these rights receives commission on room rental, cleaning fees, repair contracts etc, much like a property management company. Except they usually have a 20 year contract, and have onsite managers. These rights at the moment sell for around 5.5x annual net profit, so increase the profit, increase the value. The kicker being this is one of the few business models where the banks are begging to lend money on, we have borrowed at 5.45% interest only, 75% LTV, which gets revisited every 2 years.

This may be a convoluted way to explain a simple concept, I know the industry in Australia, but the same buzz words don't bring anything up on a search in the US.

Is this a pipedream in America? If you want a better explanation simply search "management rights Australia"

Andrew

Some friends of mine were looking at a place in Orange, Ca, that is a condo complex on leased land. A freshly negotiated land lease (not sure exactly of the lease details) would have them paying around $1300/ month (HOA included), and 4/2 condo's sell for around $100k at the moment (whereas fee land would be closer to a $500,000+ condo). Obviously the lease would have to be gone over with a fine toothed comb to know exactly where you stand. But property taxes on a similar place would probably run $5000+ per year. To rent a similar place would be around $2500.

Under the right circumstances it could be worth a look at, of course that would really depend on the lease. I haven't done any homework on it to know if this case is an anomaly.

Andrew

Just as a lender would want any property they are lending against insured, any other asset they may use as collateral they would want insured to protect themselves against loss. What if they lent against the value of the timber, and a fire, or storm or other occurrence devalued that asset? Generally a lender wants protection against that.

Andrew

Edit: I guess since it would be short term funding they might, it's kind of a unique set of circumstances, it would have to be negotiated. They would have to be creative/open minded.

Is the timber insurable?

Your best bet might be to see the house and make the offer there, so you can negotiate properly (without highlighting TOO much the deficiencies of the property) with the owner. In my mind, if you offer, see the house, determine you need a $50k discount, that may be a hard push rather than see the house and offer the lower figure to start.

Then again I am not a wholesaler, nor have I studied the intricacies of wholesaling.

Andrew

One way would be to sign up for a pro account and advertise here on BP, just make sure you have all your I's dotted and T's crossed first.

Andrew

50/50, but you would have to prove to me that you knew what you were doing.

Andrew

I am glad you are onto it @Dmitri L. I couldn't imagine trying to do the process all over again.

Hopefully someone can answer your question with regards to the loan side of things.

Andrew

What rate would you be looking to write the 2nd at? I'm guessing having a decent yield, and putting together a strong business plan (I'm thinking you'd really have to show the buyer has the ability and history to add value in an already well run enterprise).

Everyone who has posted in this thread (OP included) already know the limited information I can offer up, as an investor (not a seasoned investor) at such a high CLTV I'd really be wanting to look into the operator.

Andrew