Recently I had a gentleman approach me to meet with him to discuss a deal he was
working on: a 17 lot landsubdivision that had a projected profit of about $600,000.
He proceeded to tell me the figures, a purchase price about $1.55M to $1.65M and
kept rambling on and on…I interrupted him as I had a feeling this was going nowhere.
“Harry (not his real name), what is the biggest project you have done to date?”
[awkward silence]
He was Chinese and I wasn’t sure if he understood my question, so I asked it another
way: “Have you done land subdivisions before?”
After another awkward silence he said:”No.” MOre silence.
Trying to give him some opportunity to redeem himself, I asked another question:
“Have you done Townhouse Developments before?”
Once again more silence, and then:”No.”
This didn’t seem to bother him, as he proceeded to ramble on about the feasibility
blah blah blah….as far as I was concerned the conversation was over.
It turned out that he had $500,000 cash and wanted a good return for his money and was
looking for a great deal.
Here are 5 reasons why he will probably do his dough if he buys the site:
1. No experience. This says it all. Having a car with no drivers licence is dangerous
for all, and definitely a recipe for disaster.
2. Holding Costs. When you don’t know what you are doing it generally takes you 2-3 x
longer to figure out what to do, get an efficient approval, presales, etc. If this happens
any presales you may have will probably fall over due to delays, I have experienced this
first hand so I know believe-you-me.
3. No Local Knowledge. In 3 guesses I figured out the suburb he was in, I actually got
the postcode right the first time. I refuse to develop in that area as it is over supplied.
He doesn’t know that.
4. Banks will not lend development funding to a Beginner. Private lenders probably will
once he has an approval, at 14% p.a. interest rates, and $30,000 upfront fees, secretly
hoping he defaults and they buy the site at 65c in the dollar…he mentioned Mezzanine lenders
will lend him money too…yes at 48% p.a. and then 60% p.a. when he defaults…
5. Selling land is not easy. This has been proven time and time again, you need good
sales people and finding these people take time and building a relationship.
So here are 3 tips for those of you looking at being the next Donald Trump but have yet
to get your feet wet in the Development game. Don’t get me wrong, there’s a lot of money
to be made in development, but there’s a process you need to go through, as you can
learn the lessons with TIME or with MONEY. I have done both…Time is a lot less painful
and a lot less expensive…
Tip #1: Think Big, Start Small. In a hot market, everyone wants piece of the action, you’re
probably reading this newsletter because of all of the property hype that’s out there. Start
with where you’re at, take your time, it took me 6 months to find my first deal. It took me 3
years to get a deal where I had to lodge a Development approval. Even then when we sold
that property, the approval got torn up and tossed in the bin as I got it wrong.
Tip #2: Be An Area Expert. Get to know 2-3 suburbs intimately, the streets, the shops,
the development, the transport, the schools. You probably do this in 3-6 months. After 12
months you can probably cover 4-6 suburbs. I’m in just 2 postcodes and that’s good
enough for me. I know guys who make 7-figures in 1 postcode, go figure!!!
F.O.C.U.S. stands for FOLLOW ONE COURSE UNTIL SUCCESSFUL. Not bad
advice hey?
Tip #3: Get Educated By Someone Who’s in the Market. This could be me, it
could be someone else that you trust that has time to support and educate you.
There’s a saying:”If you think education is Expensive, Try ignorance” The market
5-10 years ago is completely different, most of the players around then are no
longer active in the Current Market. They have either sold up and exited, or lost
money in the GFC and haven’t been able to recover emotionally to get back in.
Either way, the game has changed and constantly changing from month to
month.
If you want to get some market research and on the ground feedback there’s
an opportunity for you to get it , and meet dozens of people making hundreds
of thousands of dollars in the CURRENT MARKET with little or no risk.
It’s called the Mother’s Milk Bank Brisbane Property Adventure – if you haven’t
booked in you need to register ASAP. We have only 130 seats and over 77
bookings already…held on Saturday 8th November in Brisbane this event
will give you :
1. Real Market Knowledge – this is priceless knowledge with full feasibilities
supplied, it’s great for market research
2. Real Deal Makers – mums and dads just like you and me sharing with you
their thrills and spills and their journey towards financial freedom.
3. Real Sites Making Money 2014 – current deals with warts and all revealed.
From land subdivisions, to splitters, townhouses and units, renovations and
more!!!
If you haven’t booked in this is CRAZY value at $197 (bring a fr-e-e friend),
so less than $100 each. So don’t think about this any more, just register…
or not…and either way you will pay the price in the market place :O)
Til next time,
Nhan
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