Many of you have asked me for an article about the failure of this first operation.
It is true that the merchandise trade fascinates many people. On the Internet, there are not many resources about this. So I’m going to try to democratize this profession.
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Let’s set the basics.
Investors in real estate, we have 2 options:
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For example, investing in an investment property, renting it, managing it and collecting rents over time. This is the good paternal strategy I have been laying for 15 years. An alternative is to buy real estate, value (or not!) and resell it with added value, a “margin” in the jargon of merchandise dealers.
Some carry out these redemption transactions as individuals based on their residence main. The great advantage is the exemption from the. The risk is to multiply this type of operation.
If the tax authorities can prove purely speculative the nature of your transaction, you risk a reorganization, a requalification as a merchant of goods . Explain to a tax agent why you move every four months when your professional or family structure does not change… This type of requalification is always unpleasant. You then have to pay very heavy taxes that you have not provided.
So I chose the career path and officially launched myself as a merchandise dealer .
For this, I created a dedicated structure: a SASU. Don’t ask me why, I just found that most of the merchants I frequent are in SAS or SASU. No need to turn the brain for 2 months to find the ideal status, it will be for me the SASU and the place of action!
😉 In a spirit of sympathy and generosity, my notary graciously wrote me the drafting of the statutes and took care of the registration with the Registry.
I remained at my expense the mandatory publication in a journal of legal announcements (about 180€ memory).
Unlike a rental investment, when you start as a merchandise merchant, it is very difficult (if not impossible) to get bank financing . Although remunerative, this profession can be very risky. Many “crashed” and were ruined by a dangerous operation. Banks are now very curious about financing this type of operation.
rental assets So my starting idea was for me to launch without banks. I would only make small transactions with my own funds, with a small start-up envelope and without putting myself in danger. The aim is to multiply small “self-financed” operations and thus make my “snowball” an expression dear to Warren Buffet. So last year I resold some of my and, if possible, those on which I had already generously amortized bank loans.
So I am here after a forced passage through the tax box with a small salary to start my business as a merchandise merchant . My strategy will be to tackle operations neglected by experienced merchants.
Indeed, it is not necessary to go to fight with the confirmed cadors of the profession.
Then I leave the big cities, the favorite hunting land of my new “confreres”. I’m going pick up the lame and very negotiable ducks in small towns (this is my brand;)) I am interested very quickly in a real estate complex consisting of 3 small townhouses and a commercial premises located in rural area 1h30 from Bordeaux. By studying further the market and trying to resell lots at the retail level (pull out without owning one!), i realize very quickly that the margin will certainly be ridiculous in relation to the risk involved. So I reluctantly disengage from this project.
My responsibility as an entrepreneur is to generate revenue, no stress. So sometimes you need to know how to backward to jump better.
A few weeks later, there is an opportunity that will launch me into this new profession. A client investor in the construction of investments, and friend, also now a merchant of good offers me an “association” on a project. The interest would be to dilute the risks of 2 and also to weigh heavy enough to do the operation without the banks.
So I am here in front of a lot of 2 small townhouses and a building of 3 occupied apartments as well as a second line workshop. We are 1h15 from Bordeaux in a rural village that has been severely damaged economically.
2 house to renovate 🙂
The building of the report
the workshop (a superb place)
The saleswoman’s in trouble. He has just inherited a park of 300 apartments, all in a state of catastrophic maintenance. His father, the largest owner of the city, had a reputation as a sleepy merchant. The whole park was rented in naked and without regular work. Taxation had become confiscative.
The saleswoman is therefore, in the absolute urgency of reselling lots only to pay the previous year’s tax on his property income. The situation really makes you think. Ask yourself what kind of heritage you want to pass on to your children and forget the castles of cards… Nobody wants to buy back his buildings, which are concentrated in problems of unpaid payments, unsanitary and other compromising.
Nobody except us! We make a very aggressive offer on the lot described above. The refusal is immediate, we must make an effort. A shock argument secures the saleswoman supported by the tax administration: our offer will now be without suspending loan conditions. We meet an agreement of 105,000€ for the 2 houses and the investment building! The saleswoman facing a big cash flow problem can not even advance mandatory diagnostics. We will take them at our expense (2,022€ anyway but to take or from).
We are signing a compromise. As a merchandise dealer, we benefit from transfer duties reduced to 0.715% of the price instead of 5.09% to 5.81% depending on the ministry for an individual. The condition is an obligation to resale within a maximum period of 4 years. This is where the magic works: In the week following this compromise, I find an investor ready to buy only the batch of 2 houses for… 96.000€! He also makes a very good deal. One house is rented 457€ and the other will be rented after works of about 6000€ (creation of an additional room in the attic) 480€. We could have sold them between 10 and 20% more expensive, but we risk a possible cancellation action for damage. For those who do not know what the lesion is, it is still so much to subscribe to the newsletter to find out via this link.
Our notary allows us to sign a compromise with our buyer while we are in compromise ourselves!
2 Reasons: We are professional and the first compromise is without suspending loan conditions. These cascading sales may seem surprising, but some notaries accept them. Mael my “partner” on the operation suggests that we are still trying to raise funds from the banks. The idea is to keep our money fresh if another opportunity arises.
Little parenthesis: Our “association” is actually an indivision. Our 2 respective companies acquire all the real estate in undivided at 50/50. It’s a little borderline and our accountant even advised us against it. In theory, we should have created a SNC-type structure just to do the operation. We will save this structure additional, at our own risk.
We can convince a bank to finance us. The weight and relational of Mael, who already has several successful operations, has made its impact. It’s the strength of an association. On my own initiative, I would have never been able to get financed.
We will therefore contribute EUR 28,000 and the bank will grant us a loan (an authorised overdraft in fact) of EUR 85,000 over a maximum of 24 months. We are far from 110% financing on rental investment. I’ll give you the contact of a great investment broker here.
The cost to us of such funding:
A tuition fee of €1,000. Our interlocutor went physically to visit the financed buildings to see if she was doing a dumpling or not following us 🙂 A debit interest of 3% per year a commitment commission of 1% on the amount of the overdraft authorization. The bank will also require that we be a personal deposit.
The financial cost is therefore significantly higher than conventional depreciable loans granted to investors. At this level, the objective is only to get us financed so as not to make fun of the financial conditions. A few interest rate points will not change much in the end. We will therefore accept all conditions proposed by the bank. I found the relationship and mounting the folder much simpler and faster. No endless waiting edition of loan offers, reflection period, etc. We are among the pros. It is effective, pragmatic and win-win.
We therefore become owners of the whole on May 4th and reiterate the authentic act of resale of the 2 houses on… May 16! We only owned these houses for 12 days! I challenged myself to sign the next day, but the timing issues between the games did not make it possible 🙂
The sale of the 2 houses allows us to immediately repay the loan and we are the owner of a building of 3 apartments T2 of 50m2 a superb workshop for… 17.000€ all costs included! We feel the beginning of a juicy operation, even very juicy…
Our initial strategy on this transaction was wholesale and retail resale. One of the simplest principles of trade for centuries. To increase our margin, logically, we should have resell the houses in the retail trade rather than in lots of 2.
Similarly, for the rest of the building, in order to maximize profit, it would have been wise to resell the apartments and the workshop as a unit. The procedure is quite simple. A surveyor must be used, which after studying surfaces and drawing up interior plans will produce a description of the division. The notary will then be able to draft a condominium by-law that will allow the retail sale of the lots.
Again, it is the speed of unlock that will take precedence. Time is money. With Mael, we decide to sell everything from one block to save time. I prefer to do less space and stay focused on the development of ProjectLocatif, a very ambitious project of a national network of rental investment consultants.
Initially, we also had to “remove” poorly paid tenants before reselling the building. The goal was clearly to buy problems, solve problems and resell a solution. Our original plans didn’t work. I quickly exhausted myself trying various methods to get the bugs away… bad payers forgiveness!
Neither the amicable negotiation (with the proposal of money sounding and stumbling in case of departure) nor bullying worked. I had a few borderline methods in mind, but my good responsible family father took over. We therefore decided to instruct a bailiff to initiate deportation proceedings in accordance with the rules of art.
Very quickly and since ProjectRental now requires all my mental energy, we decide to sell the building. To slightly embellish the bride, it is essential to disclutter the workshop where the equivalent of 3 dumpers has been stacked (1,500€ charged by a specialized company).
After a sale on Leboncoin and 5 visits, we stop negotiations at 100 500 euros with an investor who will do his personal business of the procedure of eviction in progress. The great advantage also for us is that it signs without suspending loan conditions.
I am convinced that our buyer also made a good deal. For our part, the customs clearance of my first operation as a merchandise dealer is particularly juicy.
Our gross margin stands out precisely at €83.828, or in percentage more than 74% generated in less than 5 months. My share therefore amounts to €41,914. With this money, I will not be able to replace my old landscape (I’m kidding, I already replaced it in fact;). You forgot that we live in the most beautiful country in the world.
So I will start by paying corporate tax on the profit of the operation being the reduced rate of 15% up to 38,120€.
With what will remain several options:
— Pay me dividends and therefore participate again in national effort and leave 30% of the sums paid (fortunately, the “flat-rate tax” limits the tax!) — Pay them in the form of wages and essentially leave them in the form of social contributions almost half of the wages paid. — Leave the money in the SASU and reinvest it in a future operation to grow my snowball.
I think of this third option…
Well, now between us, I basically wanted to do this kind of operation to earn profits, certainly, but to create value. Doing some work, cleaning a building, intersecting… I didn’t do anything in that direction and it’s the only thing that left me a funny impression during the unpacking. Not in line with my values, even though everyone is a winner in this story.
And then, Elodie rightly pointed out to me that I already had created enough value like this in recent years 😉
So see you for the next operation that I hope alsoprofitable!
Calculation or estimation of notary fees: this is how I managed!
I had not thought of it at all at first, but notary fees are a real headache and it’s not a topic that interests me! But fortunately, I saw how to calculate them on this site and I realize that finally it is quite simple in truth. To be quite honest, I did not even realize that in order to calculate my notary fees, I already needed to clarify whether I have a land, new, or old. It may seem quite logical to you but it wasn’t for me until the last few months! Then you just need to specify your department and finally the amount, because you have to talk about numbers after all! In just a few clicks, I realized that the selling costs of my last real estate acquisition were huge and I really didn’t expect it. Alongside the administrative formalities that still represented a small sum for me, it allowed me to realize the importance of choosing your notary right, and I would not get myself a second time!