NDIS Investing: is there anything safer than having the federal government paying your rent?

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Links to join the webinar will be sent monday morning

 

Please book out your calendar now for Monday, December 20th, 2:30pm Brisbane (3:30pm Sydney, Melbourne)

IMPORTANT: You make money before me on this project.

Westpac is the first mortgage holder and they are paid first.

You are second mortgage holder and you are paid out second… plus 38.5% on your capital.

We are paid last.

We are after a handful of investors to fund the purchase of the land + costs. The return on investment is 38.5%. Meaning if you put $300,000 in, you make $115,500 profit.

 

Frequently asked questions

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How secure are your profits?

There is a LOT of buffer room in this project. The distance between the total development cost and the bank valuation is very, very comfortable.

Security #1: You make money before me. On completion Westpac is paid out first, as you’d expect. You are paid second as a second mortgage holder + a fixed return on your capital which will be 38.5%. We are paid last.

Security #2: Registered charge over the development company (meaning that all profits must go to paying off the loan).

Security #3: The conservative bank valuation makes the profit goal easy to hit.

If we sold at a 20% discount to valuation and you get 100% of your money back.
If we sold at 10% discount to valuation you get all your profit too.

We’d need to sell this property 25% below bank valuation before any losses occur.

I can’t stress this enough, the builders and ourselves, we are last in line to make money. We are clearly confident in the valuation being achievable for a sale and we already have some interest in the property.

It’s 12 villas for high physical support tenants in Hervey Bay, so it’s an amazing location for this kind of facility and our SILs are wanting to secure it too. Better still it’s split across two titles so each parcel can be sold as a cluster of 6 if necessary.

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Why is the profit on the development so high?

This is massively helped by the builders not putting their margin on the build but participating in the profits from a sale. This means you are paid before they are.

Typically a builder's margin is anything from 16% to 22%, meaning our developmnet cost is significantly reduced. On a $3.3m build a 16% margin is $528,000, that's a lot of buffer space on the sale.

Obviously this significantly lowers the risk because the break even point on the sale is much lower too.

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How long will ithe project take?

Approximately 18 months, this would typically be a 12 month project but we want to be conservative. So your annualised rate of return is 25.6%.

Even if supply chains completely implode and it takes 2 years, that’s still a 19.25% annual rate.

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Can I use my SMSF?

Most probably but as always, check with your financial advisor or accountant. There is one scenario where you definitely can’t use your SMSF and that is if you become a director of the JV company that holds the loan for the project. I want to put my Super into this but I am restricted from doing so at the moment because at this stage I will be an office holder in the JV entity.

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Are we recording the webinar?

That's the plan. As mentioned, we are not professional webinar people (so I'm allowing for making mistakes) but we plan to have it recorded and post the replay as soon as possible. There is some time urgency for the property as we are in the due dilligence period right now. 

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Can you buy half the project upon completion?

Preferably the project will be sold as a 12 villa lot rarther than as 2x 6 villa lots. The funding for projects like this requires much lower LVRs so you will need between $1.5m - $2m to secure the half property. The gross rent per side is $382k, representing a gross return on cash between 19% - 25%

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Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.

Warren Buffett

Level 19 / 10 Eagle Street
Brisbane QLD 4000
Phone: 1300 852 024
Email: support@diogenes.com.au
Gray Holdings Trust
ABN 90 095 371 433