WEBVTT - Property development playbook - tips from an insider 0:00:09.280 --> 0:00:12.600 Hello and welcome to today's episode of The Money Puzzle. 0:00:12.880 --> 0:00:16.320 I'm your host James Gerard, standing in for James Kirby 0:00:16.360 --> 0:00:19.319 this week. Today we've got a special episode plan which 0:00:19.360 --> 0:00:22.760 is going to be all about property development, but not 0:00:22.800 --> 0:00:26.320 your fifty story high rise skyscraper. We're talking about property 0:00:26.320 --> 0:00:29.400 development for the average mum and dad investor. So if 0:00:29.400 --> 0:00:32.000 you've ever considered diving into the world of property development, 0:00:32.280 --> 0:00:35.800 this episode is for you. We'll be breaking down the basics, 0:00:35.800 --> 0:00:38.280 sharing tips and tricks, and discussing the ins and outs 0:00:38.320 --> 0:00:41.240 of property development. So grab a notepad and get ready 0:00:41.240 --> 0:00:44.120 to learn how you can start your property development journey. 0:00:44.400 --> 0:00:46.519 And to help us with this special episode, we have 0:00:46.680 --> 0:00:51.200 an equally special guest, di Chi Samahara, property developer at 0:00:51.520 --> 0:00:54.960 National Buyers Agency firm Property Buyer. Welcome, Dichi. 0:00:55.040 --> 0:00:56.120 Hello, James, how are you. 0:00:56.760 --> 0:00:59.880 I'm doing well? Thanks for coming on today. So let's 0:01:00.080 --> 0:01:03.240 jump straight into it. Okay, So opening the lid on 0:01:03.240 --> 0:01:05.920 the word of property development. It's estimated that only two 0:01:05.959 --> 0:01:09.800 to three percent of all property investors engage in development activities. 0:01:10.120 --> 0:01:11.520 Why do you think that's the case. There's a lot 0:01:11.520 --> 0:01:13.520 of people that buy investment properties, but not many people 0:01:13.560 --> 0:01:14.640 that actually develop them. 0:01:15.760 --> 0:01:16.520 Two reasons. 0:01:16.600 --> 0:01:21.920 One is that investment and development they're completely different approach. 0:01:22.000 --> 0:01:26.280 So property investments is more passive and you're targeting mid 0:01:26.319 --> 0:01:30.600 to long term returns, whereas property developments is more coactive 0:01:31.080 --> 0:01:37.560 and short to medium term form of investments. Now, availability 0:01:37.600 --> 0:01:42.800 is another reason why there's only one or two properties 0:01:43.080 --> 0:01:45.680 out of every hundred sites that go off with sales. 0:01:45.800 --> 0:01:49.560 So just from the stuff, there is not many sites available, 0:01:49.600 --> 0:01:52.520 so that puts a limit on to how many people 0:01:52.560 --> 0:01:55.760 can actually make money as a developer. 0:01:55.800 --> 0:01:56.920 That makes sense. 0:01:57.080 --> 0:01:59.400 Yeah, And when you say a site, what do you 0:01:59.400 --> 0:02:01.080 mean is that like a raw block of land is 0:02:01.080 --> 0:02:04.040 at a house with a land that's conducive for development? 0:02:04.680 --> 0:02:07.680 Yeah? Yeah, So look how if you have a thousand 0:02:07.800 --> 0:02:11.240 square meter a lot with a small house at the 0:02:11.320 --> 0:02:13.680 front with a little space on the site, that's a 0:02:13.680 --> 0:02:17.399 potential subdivision site. If you see just another house down 0:02:17.400 --> 0:02:19.720 the road up for sale on real estate dot com 0:02:19.960 --> 0:02:24.400 that's really run down, but potential for renovation, that's a site. 0:02:24.400 --> 0:02:28.400 So yeah, we call these properties sites in general. 0:02:28.720 --> 0:02:32.000 Got it? And we see in the media almost every 0:02:32.080 --> 0:02:35.200 day about another construction company going under, and in fact, 0:02:35.200 --> 0:02:38.760 two thousand have gone bust. Over the past three years. 0:02:39.040 --> 0:02:41.400 So I'm just wondering his property development is still a 0:02:41.440 --> 0:02:44.680 profitable business and what's changed in recent years to cause 0:02:44.720 --> 0:02:46.880 all of these liquidations and bankruptcies. 0:02:47.840 --> 0:02:50.960 Look short aus is Yes, it's a very still profitable 0:02:51.200 --> 0:02:53.680 for certain products in certain areas. You're just going to 0:02:53.720 --> 0:02:56.920 be more careful what to pitch now compared to ten 0:02:57.000 --> 0:03:00.480 twenty years ago, because the building cost is hi. 0:03:00.639 --> 0:03:01.639 So whether you're. 0:03:01.480 --> 0:03:04.720 Building a house, duplex, unit, townhouses, they only work in 0:03:04.720 --> 0:03:07.640 the areas with mid to high medium prices. So if 0:03:07.680 --> 0:03:09.919 it's going to cost you, let's say five hundred thousand 0:03:09.960 --> 0:03:13.959 dollars to build in one suburb where the resale is 0:03:14.000 --> 0:03:15.960 a million, but the outer suburb you can sell it 0:03:16.000 --> 0:03:18.920 for two mil, naturally you will go two million dollars suburbs. 0:03:18.960 --> 0:03:22.240 So I'd go as far as Castle Hill to the 0:03:22.240 --> 0:03:24.920 west and Epping to the south. And if you're in 0:03:24.960 --> 0:03:28.040 that's that's if you're all targeting north apart of Ridge. 0:03:28.440 --> 0:03:29.280 But if you're in. 0:03:29.240 --> 0:03:32.000 The south apart of Ridge, I'd say you go as 0:03:32.040 --> 0:03:35.320 far as Stratfield to the west and Birdwood to the south. 0:03:35.360 --> 0:03:39.040 And generally speaking, you want to be targeting only suburbs 0:03:39.080 --> 0:03:42.040 with medium price above two mil and outside of these areas, 0:03:42.080 --> 0:03:46.320 resale values just don't stand. So I guess that's how 0:03:46.400 --> 0:03:51.600 you pick which areas to start your projects and to 0:03:51.680 --> 0:03:52.760 make sure that you make money. 0:03:53.120 --> 0:03:56.760 Got it, and say, folks, which is a term which 0:03:56.800 --> 0:04:00.640 James Kirby would say, dayti's talking about Sydney. I mean 0:04:00.840 --> 0:04:02.560 we do have listeners from all over the country, and 0:04:02.600 --> 0:04:05.440 in fact I know all over the world in places 0:04:05.480 --> 0:04:08.240 such as Dubai in Singapore, so we'll try and cover 0:04:08.320 --> 0:04:10.520 other markets as well. But at this stage it was 0:04:10.760 --> 0:04:13.200 Sydney that you were speaking about it, and that's where 0:04:13.520 --> 0:04:16.800 you're based. So why did you get into a property development. 0:04:18.600 --> 0:04:24.560 I've always wanted to become a developer, just simply because 0:04:24.600 --> 0:04:28.200 of the lifestyle choices that you will have. So my 0:04:28.480 --> 0:04:31.800 job is not nine to five, it's really twenty four 0:04:31.839 --> 0:04:35.040 to seven, but I get to choose when and where 0:04:35.279 --> 0:04:38.600 and how I want to work. Especially on post COVID 0:04:39.680 --> 0:04:43.800 remote work has been very popular. But even before that, 0:04:43.960 --> 0:04:47.720 I was able to live my lifestyle. So that's how 0:04:47.760 --> 0:04:50.160 I got into it. Well, that's the reason why I 0:04:50.240 --> 0:04:50.640 got into it. 0:04:51.480 --> 0:04:55.400 Got it. So I'm imagining in Red Ferrari pulling up 0:04:55.440 --> 0:04:58.720 to construction site, you pull out with your your chinos 0:04:58.839 --> 0:05:01.920 and boots wearing hard hat. Point in telling people what 0:05:01.960 --> 0:05:03.320 to do? Is that sort of the lifestyle of a 0:05:03.400 --> 0:05:04.160 property developer? 0:05:04.480 --> 0:05:08.480 Almost true, except not Ferrari or Lamborghinia. I'll drive a 0:05:08.560 --> 0:05:11.000 white Highlux. You know, I'll get to I've got to 0:05:11.000 --> 0:05:12.160 look at part as a developer. 0:05:12.240 --> 0:05:15.960 So I a driver, good, good, very very practical. And 0:05:16.160 --> 0:05:20.280 what about education? Is there anything in particular that you 0:05:20.720 --> 0:05:23.640 have done that helped prepare you to jump into property development, 0:05:23.680 --> 0:05:26.640 or anything with your career that helped move into property development. 0:05:27.520 --> 0:05:32.039 I think a lot of developers have one particular profession 0:05:32.279 --> 0:05:36.040 of their own. Otherwise, you know, you can't really get 0:05:36.040 --> 0:05:40.200 ahead of everyone else. My case, I started as a 0:05:40.520 --> 0:05:42.560 started as a real estate agent, so I was working 0:05:42.640 --> 0:05:44.200 for Ray White First National. 0:05:45.240 --> 0:05:46.239 Did it for a few years. 0:05:47.480 --> 0:05:49.719 Made you know, some seed money, but it was mainly 0:05:49.839 --> 0:05:53.880 getting that that practice and also experience in the real 0:05:54.000 --> 0:05:59.880 estate environment. But some other people, they could be a 0:06:00.080 --> 0:06:02.600 builder or train any kind of trade to have that 0:06:02.760 --> 0:06:05.400 sort of knowledge ahead of everyone else. You could be 0:06:05.480 --> 0:06:08.200 a banker or an accountant who will know the numbers, 0:06:08.279 --> 0:06:11.960 really will. So I think as long as you have 0:06:12.360 --> 0:06:16.120 that one particular profession. It doesn't have to be this 0:06:16.360 --> 0:06:19.640 particular profession. If that makes sense. 0:06:20.320 --> 0:06:23.600 Yeah, got it, that absolutely makes sense. Understanding where your 0:06:23.640 --> 0:06:27.159 personal straps are and then applying that to the property development. 0:06:27.279 --> 0:06:31.719 So next time, I'm curious about what type of average investors. 0:06:31.760 --> 0:06:34.720 So we're talking about mum and dad investors, what sort 0:06:34.760 --> 0:06:38.000 of characteristics or traits do you think they need to 0:06:38.040 --> 0:06:39.800 get started in property development. Do they need to have 0:06:39.920 --> 0:06:43.720 a high level of to tolerate risk. Do they need 0:06:43.839 --> 0:06:46.640 to have certain experience? Do they need to have a 0:06:46.680 --> 0:06:48.720 certain amount of backing but behind them? So you know, 0:06:48.760 --> 0:06:51.080 who's sort of suited for property development? 0:06:51.839 --> 0:06:55.080 I think someone who is proactive and once more control 0:06:55.279 --> 0:06:58.600 over the course of their investments and often in the 0:06:58.640 --> 0:07:02.320 shorten to around time. So if you invest in a properties, 0:07:03.800 --> 0:07:06.000 you know, two bedroom unit for example, there's not much 0:07:06.120 --> 0:07:09.680 you can do to you know, control this due course. 0:07:09.680 --> 0:07:13.240 Whereas property developments it's all about you know, making sure 0:07:13.280 --> 0:07:15.760 you control it really well so that it doesn't go wrong. 0:07:16.440 --> 0:07:20.360 So I think the approach, if you enjoy that proactive approach, 0:07:20.560 --> 0:07:23.840 I think you're suited to be a developer. And also 0:07:24.560 --> 0:07:26.840 that you need to have really thick skin on the 0:07:26.920 --> 0:07:30.840 face and also just tenacity to go for you know, 0:07:30.920 --> 0:07:32.840 one after another, so. 0:07:33.080 --> 0:07:33.600 Go get up. 0:07:33.760 --> 0:07:36.960 Yeah. Interesting, that's interesting about the comments about the thick skin. 0:07:37.240 --> 0:07:42.760 So what happens in the world of property development that 0:07:43.040 --> 0:07:45.080 requires you to have a thick skin? Is it dealing 0:07:45.120 --> 0:07:47.680 with people that you're buying the properties from. Is it 0:07:47.760 --> 0:07:51.200 dealing with the builders that you engage in? Curious about 0:07:51.280 --> 0:07:52.920 some of the stress points. 0:07:55.000 --> 0:07:57.320 Look, you deal with a lot of people. 0:07:57.520 --> 0:08:02.120 They I'll personally love of going direct to vendors instead 0:08:02.120 --> 0:08:05.600 of have gone through asians because I get quality sites 0:08:05.640 --> 0:08:09.280 that way, or at least I'll believe that when I 0:08:09.360 --> 0:08:12.040 go door knocking, and people usually don't like people hocking 0:08:12.080 --> 0:08:14.520 on your door, So you're gonna you're gonna have thick 0:08:14.600 --> 0:08:16.400 enough skin on your face to have the door slammed 0:08:16.440 --> 0:08:20.080 in your face every now and then. But also is 0:08:20.160 --> 0:08:23.280 just just talking to builders, you know that they could 0:08:23.280 --> 0:08:26.840 be really rough and they're good people, but they come 0:08:26.880 --> 0:08:29.720 across very aggressive sometimes, but so you've just got to 0:08:29.760 --> 0:08:30.120 deal with it. 0:08:31.680 --> 0:08:32.880 Not all of them, by the way, but. 0:08:33.880 --> 0:08:37.840 Yeah, generally stress tolerance level that's very important. 0:08:37.880 --> 0:08:39.520 So yeah, that's yeah, the think goes better. 0:08:39.559 --> 0:08:43.959 I think I understood and for someone who's wanted to 0:08:43.960 --> 0:08:46.240 get started out in property development. Is there anything that 0:08:46.400 --> 0:08:49.599 you had come across that would help any websites with 0:08:49.760 --> 0:08:53.839 useful information? And the YouTube courses are their template spreadsheets 0:08:53.880 --> 0:08:56.720 out there is anything to sort of kick start somebody 0:08:56.720 --> 0:08:57.839 who wants to learn more about this? 0:08:58.679 --> 0:09:01.920 Yeah, yeah, look, I mean there's not any particular course 0:09:02.000 --> 0:09:04.800 that you want to enroll yourself in, so it's not necessary. 0:09:05.280 --> 0:09:08.680 All the how to develop property one oh one type 0:09:09.360 --> 0:09:12.559 of videos are all over YouTube, So just watch something 0:09:12.640 --> 0:09:15.439 that's well edited and it makes sense to you what 0:09:15.559 --> 0:09:22.680 you enjoy. But I think practicing running feesos is better 0:09:22.800 --> 0:09:25.680 than any other training that you can get off these videos, 0:09:25.679 --> 0:09:28.079 to be honest with you, So start with a simple 0:09:28.160 --> 0:09:32.600 renovation job. Compare the buying price to the resale value 0:09:32.600 --> 0:09:34.240 and see if there's in you're not enough margin in 0:09:34.320 --> 0:09:38.480 it after considering not just build costs but GSD levees interest. 0:09:38.600 --> 0:09:41.079 You can find these on domain real estate dot com 0:09:41.120 --> 0:09:44.920 dot au and yeah, once you get used to it, 0:09:45.080 --> 0:09:47.520 then you know you can do one for new build 0:09:47.600 --> 0:09:51.400 and then duplexed, then maybe two to three subdivision and 0:09:51.520 --> 0:09:54.839 even if you have no idea about anything, now trust me, 0:09:54.920 --> 0:09:57.920 once you have run a hundred feesos and read through 0:09:57.960 --> 0:10:00.960 a few led p s DCPs. You will start feeling 0:10:01.000 --> 0:10:02.959 more comfortable in what you're doing and move on to 0:10:03.080 --> 0:10:05.000 considering the first real life project. 0:10:06.040 --> 0:10:09.360 Perfect. Yeah, so step by step, start with renovating a 0:10:09.400 --> 0:10:12.120 bathroom and then work your way up to doing a 0:10:12.360 --> 0:10:14.960 ten subdivision lot development somewhere. 0:10:15.679 --> 0:10:16.160 Yeah, that's it. 0:10:16.400 --> 0:10:19.720 Just just if it's just practice practicing fees it it's free. 0:10:19.720 --> 0:10:21.600 You don't losing your money, So that's the best way 0:10:21.640 --> 0:10:21.960 to learn. 0:10:23.080 --> 0:10:25.680 Yeah, it's a good point. Looking in your own backyard 0:10:26.440 --> 0:10:29.760 pun intended. So looking in your own property portfolio and 0:10:29.920 --> 0:10:33.000 seeing if there's any scope to improve the value of 0:10:33.160 --> 0:10:36.360 existing properties you have. So I suspect that you could 0:10:36.360 --> 0:10:38.520 have a look at things like can I build a 0:10:38.559 --> 0:10:41.040 grany flat in the back of an investment property? Do 0:10:41.160 --> 0:10:45.080 I have enough land to subdivide? Is it worthwhile doing 0:10:45.280 --> 0:10:48.480 a knockdown and rebuild or a knockdown and building townhouses 0:10:48.960 --> 0:10:50.640 on the site, or is it just worth maybe doing 0:10:50.760 --> 0:10:54.120 a renovation, and as you said, Dichi, looking at the 0:10:54.200 --> 0:10:57.600 cost of the renovation and then afterwards, what's that uplifting 0:10:57.800 --> 0:11:01.400 value of the property. And if you find that that 0:11:01.559 --> 0:11:03.720 worked well on your own portfolio, then maybe you can 0:11:03.720 --> 0:11:07.680 get started and looking for other sites to purchase, not so. 0:11:07.800 --> 0:11:11.640 Much your own portfolios. You do your practice rounds on 0:11:12.280 --> 0:11:15.839 looking for sites for sale on real estate dot com 0:11:16.160 --> 0:11:20.000 or domain dot com dot au because usually your portfolio 0:11:20.720 --> 0:11:25.559 is not necessarily suited for property developments. You got to 0:11:26.320 --> 0:11:29.079 for the development project to work, you've got to get 0:11:29.120 --> 0:11:30.880 it right from the start, at the buy in. 0:11:31.280 --> 0:11:32.720 So if you already have. 0:11:32.760 --> 0:11:35.839 An investment property portfolio, chances out it wasn't bought for 0:11:35.920 --> 0:11:40.040 development purposes, so you don't often find something profitable within 0:11:40.120 --> 0:11:41.920 your own portfolio. It's just going to start from the 0:11:43.000 --> 0:11:43.480 number one. 0:11:43.559 --> 0:11:45.560 Step one. It was just to find and buy the. 0:11:45.600 --> 0:11:48.439 Side, got it. So your suggestion is to be purposeful 0:11:48.600 --> 0:11:50.760 with it. Don't look at what you have and try 0:11:50.840 --> 0:11:53.520 and make a triangle fit into a square hole and 0:11:54.480 --> 0:11:58.040 develop your existing asset to start from scratch. Correct. 0:11:58.200 --> 0:11:58.560 Correct. 0:11:59.080 --> 0:12:02.800 The expression that I use always is that no matter 0:12:02.880 --> 0:12:06.400 how well you cook a rock, you can't make it taste. 0:12:06.160 --> 0:12:06.679 Like a steak. 0:12:07.679 --> 0:12:10.360 So you've just got to Yeah, the property the site 0:12:10.559 --> 0:12:12.200 has to be right from the start. 0:12:12.480 --> 0:12:15.360 Yeah, that makes sense, all right. Well, talking about property 0:12:15.480 --> 0:12:17.560 developments and the different types, can you run us through 0:12:17.640 --> 0:12:19.880 what the different types of property developments are that maybe 0:12:19.920 --> 0:12:23.200 an average mum or dad could consider. So I'm thinking 0:12:23.240 --> 0:12:26.400 about things like buying a vacant block of land. Is 0:12:26.440 --> 0:12:28.640 that maybe better to do? Should you buy something in 0:12:28.679 --> 0:12:31.280 an established area with an old house on it? Should 0:12:31.320 --> 0:12:34.959 you be looking at subdivisions, knockdowns? And there's a lot 0:12:35.040 --> 0:12:38.280 of different options or spectrum of options when you say 0:12:38.320 --> 0:12:41.679 the word property development. But for the average sort mum 0:12:41.760 --> 0:12:43.800 and dad investor, can you run me through some of 0:12:43.840 --> 0:12:45.719 the more common types of developments that they might be 0:12:45.760 --> 0:12:46.640 able to get involved in. 0:12:47.840 --> 0:12:53.120 Look everything you mentioned, renovation, new build, duplex, subdivisions, they're 0:12:53.160 --> 0:12:56.800 generally a good place to start because they're less factors 0:12:56.840 --> 0:13:00.079 that could go wrong. This is important because if the 0:13:00.160 --> 0:13:03.079 project does go wrong for some reason, why you have 0:13:03.280 --> 0:13:06.720 less to lose. It's actually very hard to lose money 0:13:06.800 --> 0:13:09.559 as long as you're only developing one or two keys, 0:13:10.000 --> 0:13:13.240 because these if you're only building one or two keys, 0:13:13.640 --> 0:13:17.920 the potential debt can be managed on the personal level, 0:13:17.960 --> 0:13:20.319 whereas if you had like five ten kids going at 0:13:20.320 --> 0:13:22.560 the same time, then quite often that's enough. 0:13:22.520 --> 0:13:25.760 To bankrupt you. So that would be where I'll start. 0:13:25.880 --> 0:13:27.479 If I was just starting out today. 0:13:28.280 --> 0:13:32.840 Okay, and then we're choosing a builder, which is central 0:13:32.920 --> 0:13:36.400 to development. If you're knocking down and you're building stuff 0:13:36.840 --> 0:13:40.120 over the years, how have you found a knack at 0:13:40.280 --> 0:13:43.719 picking developers? So, builders, what are you looking for with 0:13:43.920 --> 0:13:47.640 the builder themselves or through their company to have the 0:13:47.720 --> 0:13:50.160 best chance that they're going to complete the build in 0:13:50.280 --> 0:13:52.400 the time frame, in the budget, in the specs that 0:13:52.480 --> 0:13:52.800 you want. 0:13:54.040 --> 0:13:59.679 Look, I would be looking at not the cheapest. First 0:13:59.720 --> 0:14:02.600 of all, I'll run a tender always at least three. 0:14:02.920 --> 0:14:05.840 But someone don't necessarily go for the cheapest builder. 0:14:06.360 --> 0:14:09.120 I would go for someone that. 0:14:10.720 --> 0:14:15.719 Can justify what they're charging for and how much. And 0:14:16.320 --> 0:14:17.800 because at the end of the day, you know, if 0:14:17.840 --> 0:14:20.880 you find a builder that is way cheaper than everyone else's, 0:14:20.920 --> 0:14:24.240 chances are they are trying to collect as much cash 0:14:24.280 --> 0:14:28.160 as possible before they fall, for example. So mate, you 0:14:28.240 --> 0:14:31.760 look at if you want to be very very diligent 0:14:31.800 --> 0:14:33.960 about it, you want to be just tracking how many 0:14:34.080 --> 0:14:37.600 jobs they have. You can even try trying to find 0:14:37.640 --> 0:14:42.320 out how much asset they have to assess the risk 0:14:42.440 --> 0:14:46.040 of them going bankrupt, which is probably not a silly 0:14:46.120 --> 0:14:49.960 thing to do in this market right now, that's. 0:14:49.800 --> 0:14:52.840 A good point. All right, Well, moving along to different 0:14:52.960 --> 0:14:56.600 budgets for property development. Some people listening might have five 0:14:56.680 --> 0:14:59.920 hundred thousand to invest into a property and the development. 0:15:00.160 --> 0:15:03.520 Others might have five million dollars. So could we maybe 0:15:03.560 --> 0:15:05.600 break it down to a few different price points they 0:15:05.640 --> 0:15:08.320 say less than a million dollars, then maybe one to 0:15:08.440 --> 0:15:12.200 three million, and then three million to maybe six million dollars. 0:15:12.240 --> 0:15:14.200 And if we could open up to around the country 0:15:14.240 --> 0:15:17.400 as well rather than just focus on Sydney, what type 0:15:17.440 --> 0:15:19.880 of property development would you suggest for each of those 0:15:19.920 --> 0:15:22.600 three sort of budgets. And again there's not advice to anyone, 0:15:22.640 --> 0:15:25.880 it's more just sort of ideas of, you know, where 0:15:26.440 --> 0:15:30.200 might be attractive with regards to the different types of 0:15:30.240 --> 0:15:33.280 property development that you could potentially do. So to recap 0:15:33.400 --> 0:15:36.120 listen a million, second category one to three million, and 0:15:36.200 --> 0:15:37.760 third category three to six million. 0:15:38.360 --> 0:15:42.240 Sure sure, Look, you're borrowing capacity and cash in hand 0:15:42.320 --> 0:15:44.440 at two different things. So I'm going to talk very 0:15:44.560 --> 0:15:47.240 generically to you because that million dollars could mean anything. 0:15:47.320 --> 0:15:50.000 So say if you had two hundred thousand dollars cash 0:15:50.120 --> 0:15:52.440 save up and then you can borrow let's say sixty 0:15:52.480 --> 0:15:54.800 percent of VR, that's three hundred K you can buy 0:15:54.920 --> 0:15:57.440 up to half a million dollars in property, but if 0:15:57.480 --> 0:15:59.920 you can borrow up to eighty percent in metro area, 0:16:00.440 --> 0:16:02.680 you can buy up to a million dollars in property. 0:16:02.800 --> 0:16:07.600 But I spoke about having the minimum threshfold a threshold 0:16:07.640 --> 0:16:10.520 for meeting prices earlier on. If we spent the whole 0:16:10.600 --> 0:16:12.520 two hundred k that you've saved up, you have no 0:16:12.680 --> 0:16:14.920 money left to even run. A DA should be your 0:16:14.960 --> 0:16:18.520 first step. So when you have less than say half 0:16:18.560 --> 0:16:20.960 a million dollars in cash, you can't really fund purchase 0:16:21.080 --> 0:16:23.480 of the property and pay for the DA on your own. 0:16:23.600 --> 0:16:28.080 So until you surp surpass that benchmark, you should really 0:16:28.120 --> 0:16:30.320 team up with someone. Otherwise you just can't get that 0:16:30.560 --> 0:16:32.720 traction you need. But once you hit that set of 0:16:32.760 --> 0:16:39.320 half a million dollars mark, then I would be looking 0:16:39.560 --> 0:16:42.680 at some suit of simple way to probably look at 0:16:43.040 --> 0:16:47.560 is if you're targeting its minimum two million dollars meeting 0:16:48.320 --> 0:16:51.160 miting price suburb and then if you have let's say 0:16:51.640 --> 0:16:54.120 less than million dollars, let's say your first cattery half 0:16:54.120 --> 0:16:57.120 a million dollars to million dollars, that will be enough 0:16:57.280 --> 0:17:01.200 to buy yourself let's say million, two million, one and 0:17:01.240 --> 0:17:06.160 a half million dollars property for subdivisions, So you could 0:17:06.240 --> 0:17:11.320 be targeting where would that be Earlwood would be would 0:17:11.359 --> 0:17:14.880 have that around sort of just or under two million 0:17:14.920 --> 0:17:18.040 dollars mark, so you will probably pick up a potential 0:17:18.760 --> 0:17:21.680 maybe a knockdown rebuild site in earl would to build 0:17:21.920 --> 0:17:24.399 one extra key on maybe two. But if you have 0:17:24.760 --> 0:17:29.480 one to three million dollars, then you can start running four. 0:17:29.359 --> 0:17:32.520 Different key four let's say four more than four keys. 0:17:32.680 --> 0:17:36.520 So you could be running a project that could that 0:17:36.640 --> 0:17:40.960 you build four townhouses in a medium sort of average area, 0:17:41.480 --> 0:17:43.119 or you can choose to run eight in. 0:17:43.119 --> 0:17:46.240 A cheaper area, or you can choose to run two 0:17:46.640 --> 0:17:50.840 let's say very expensive duplexes in more. 0:17:50.760 --> 0:17:53.080 Like eastern suburbs or lower north Shore. 0:17:55.000 --> 0:17:55.240 Three. 0:17:55.520 --> 0:17:58.280 When you have three to six million dollars, then you 0:17:58.960 --> 0:18:01.920 and if this was hash not your borrowing capacity, once 0:18:02.000 --> 0:18:04.880 you have three million dollars six million dollars, you start 0:18:04.960 --> 0:18:05.359 moving on. 0:18:05.480 --> 0:18:11.200 To sort of do you really want to be putting 0:18:11.280 --> 0:18:11.879 that three to. 0:18:11.960 --> 0:18:14.400 Six million dollars to run your own project? You could 0:18:14.520 --> 0:18:18.400 be better off maybe teaming up with a bigger developer 0:18:18.600 --> 0:18:22.200 and you go in as a potential equity partner to 0:18:22.640 --> 0:18:27.840 have them delivery let's say twenty thirty forty townhouses units, 0:18:28.400 --> 0:18:35.160 and then you can leverage off their professional experience and capabilities. 0:18:36.000 --> 0:18:37.680 So that does that make sense? 0:18:37.800 --> 0:18:40.840 You up to about three mil, you you will be 0:18:41.640 --> 0:18:45.120 you're you know, if you're a novous developer, then run 0:18:45.160 --> 0:18:48.080 your own project. But after three mel, you'll you know, 0:18:48.200 --> 0:18:50.679 you want to be working with bigger guys. That's how 0:18:50.760 --> 0:18:51.639 I feel. 0:18:52.280 --> 0:18:55.199 Yeah, that makes sense. And for everyone who's not in Sydney. 0:18:55.280 --> 0:18:57.639 Earlwood is a suburb that's sort of about ten to 0:18:57.680 --> 0:19:01.919 fifteen kilometers outside of Sydney b D. Did I hear 0:19:01.920 --> 0:19:04.840 you say something about keys. I think you said eight keys? 0:19:05.760 --> 0:19:07.440 What do you mean by by that? With regards? 0:19:07.760 --> 0:19:11.520 Yeah, look, Iran, people say it differently. I say keys, 0:19:12.640 --> 0:19:15.720 but if some people say sites per site or dwellings. 0:19:15.800 --> 0:19:19.560 But it's a number of literally a key to open 0:19:19.640 --> 0:19:22.200 the door. So if you say I'm doing eight keys, 0:19:22.320 --> 0:19:25.440 that means I'm dwelling building eight dwellings, or some people 0:19:25.600 --> 0:19:27.480 you know might just say, oh, I'm doing eight dwellings. 0:19:27.880 --> 0:19:31.879 If I say four keys, I'm building full houses or units. 0:19:32.359 --> 0:19:34.960 Got it? That makes sense? There we go everyone, We're 0:19:35.040 --> 0:19:38.240 starting to learn the property development lingo keys. I haven't 0:19:38.280 --> 0:19:38.920 heard of that much. 0:19:39.640 --> 0:19:44.200 The keys are usually used to describe hotels and motels, 0:19:44.240 --> 0:19:46.440 but I started using this because a lot of people 0:19:46.560 --> 0:19:49.040 understand keys more than when I say sites. 0:19:49.560 --> 0:19:51.640 Yeah no, no, that makes sense. All right, Well, before 0:19:51.680 --> 0:19:53.800 we get into the nuts and bolts of the property 0:19:53.840 --> 0:19:58.000 development process, le let's take a pause for a break. Hello, 0:19:58.119 --> 0:20:00.400 and welcome back to the money part. As the Lame 0:20:00.480 --> 0:20:03.359 James Gerard, writer contributed to the Wealth section of the 0:20:03.400 --> 0:20:08.160 Australian newspaper and also Financial Advisor with Financial Advisor dot 0:20:08.280 --> 0:20:11.080 com dot Au. And this week on the show, I 0:20:11.200 --> 0:20:16.520 have die Gi Samahara, Director Property Developer and from Buyers 0:20:16.520 --> 0:20:20.400 agency firm Property Buyer. So now let's have a chat 0:20:20.440 --> 0:20:22.600 about the development process. But before we do that, I 0:20:22.680 --> 0:20:24.920 just want to remind everybody that what we're discussing is 0:20:25.000 --> 0:20:28.040 general advice. It's not personal advice. So please don't go 0:20:28.160 --> 0:20:31.040 out there and start buying properties and getting shovels in 0:20:31.359 --> 0:20:35.440 developing stuff. Go seek advice from a qualified professional before 0:20:35.480 --> 0:20:38.880 you do anything. All right, Diji, let let's jump into 0:20:38.920 --> 0:20:41.840 the development process. So can you run me through what 0:20:41.960 --> 0:20:46.320 a typical development process would be from the beginning stage 0:20:46.400 --> 0:20:49.080 to the finishing stage and then some of the common 0:20:49.200 --> 0:20:51.800 challenges that you would face in that. And let's maybe 0:20:51.880 --> 0:20:55.040 work off the example of let's say a Sydney or 0:20:55.119 --> 0:20:58.639 Melbourne thousand square meter property with an old house on it. 0:20:58.880 --> 0:21:01.680 The local Environment plan from the council is conducive to 0:21:01.800 --> 0:21:04.840 be able to knock down the old house and subdivide 0:21:04.880 --> 0:21:09.280 it and build two townhouses on separate titles there. So 0:21:09.400 --> 0:21:12.560 can you run me through from we've founded the property, 0:21:12.600 --> 0:21:14.800 we've agreed on the price, how do we get from 0:21:14.880 --> 0:21:19.320 that point through to the keys having these two townhouses 0:21:19.359 --> 0:21:20.720 and selling those off for a profit. 0:21:21.119 --> 0:21:26.040 Look, if I was to really broadly. 0:21:28.160 --> 0:21:31.040 Just ordered to process that will be acquisition which you 0:21:31.200 --> 0:21:35.359 just mentioned, you get the offer and acceptance exchange sets 0:21:35.400 --> 0:21:40.400 on it. Now you've got the DA process, So that's 0:21:40.440 --> 0:21:43.680