MATT JONES No Money Down Deals Using OPM

Disclaimer – Read Before Continuing All information provided in this PowerPoint Presentation is general information only and is not intended as financial, accounting or legal advice. Viewers are encouraged to consult a licensed financial planner, accountant and lawyer prior to making any decisions regarding their financial situation.

Lets talk about using OPM What is Other Peoples Money (OPM)? Bank Private money or mezzanine finance Equity in a property Joint venture partner Money partner Self Managed Super Fund (SMSF) Why use OPM? Leverage - Even the Donald Trumps of the world uses OPM

Where does OPM fit in? Four parts to a profitable deal: 1. Capital (cash or equity) 2. Servicing (borrowing money) 3. Skill (to implement & manage a strategy) 4. Finding the deal (often underrated) OPM slots into points 1 and 2

Examples of OPM – Capital/Equity Using OPM to fund the deposit if you have no cash Purchase price of a double lot $500k: Money partner provides $100k (20% deposit) to allow you to buy the site You pay money partner 15% pa for 6 months totaling $7500 ($100k x 15% divided by 2) Capitalise the interest: you pay the interest with principal at end of loan or pay half the interest monthly and remainder at end of loan The $7500 becomes a project expense and could be part of the $100k you borrowed in the first place!

Examples of OPM – Capital/Equity Using OPM to fund the cost of the subdivision if you have no cash Could be the same money partner that provides another $100k to fund the cost of subdivision You pay money partner 20% pa for 3 months totaling $5000 ($100k x 20% divide by 4) Again capitalise the interest: you pay the interest with principal at end of loan and it becomes a project expense Would you pay $5000 if it allowed you to get the deal done?

Examples of OPM – Servicing Using OPM to secure the site if you cant borrow from the bank: Purchase price of a double lot $500k: You bring in a Joint Venture partner (separate to money partner) that goes on the loan for $400k because they have serviceability with the bank Holding costs come out of the money partners contribution so that the interest repayments dont fall to the JV partners which keeps the project separate from personal circumstance You bring skill to the table and manage the project to a profitable outcome, joint venture partner brings servicing capacity (money partner brings cash) Split the profit 50/50 with JV partner (money partner already received a return on their cash)

$500k Purchase site to subdivide into 2 $200k from Money partner paid 20% pa capitalised secured with 2 nd mortgage 6 month loan ($20k) $400k JV partner borrow from bank secured against site $100k Subdivision costs + $600k Total project costs Pays for deposit, stamp duty, holding costs, legals, subdivision, interest Sell 2 lots for $700k Pay money partner $220k Profit $80k Pay bank $400k $40k to you$40k to JV Partner

Where do you find OPM? Networking Groups Work Colleagues Family & Friends (be careful) Mentoring programmes Your accountant or solicitor (if long term relationship exists) Professional joint venture partners that develop property full time Check your phone!

Separate the deal from your life Structure the project so that it is contained. Eg unit trust created specifically for that project Ensure all the cash is available for the deal, including: Acquistion Add value costs (DA, reno, subdivision etc) All holding costs! The circumstances in your life should not affect the deal. Eg if you lose your job or hit by a bus, the deal doesnt suffer

Lets talk about OPM Any Questions?