19 Jun Emotions vs Property Market | Borderless Investors | Finding good Tradies | Suburbs that are coming to Life | Properties with a Twist
Margaret Lomas takes a look at the suburbs around Australia that are ‘coming to life’ in terms of future growth. She says don’t overlook Melbourne just because there is a lot of talk about oversupply. She tells us why.
Property investment & business coach Peter Spann explains what he looks for when he buys a property and how he identifies ones with a twist. He tells us about his best and worst deals and what he learned from those experiences.
Bryce Holdaway from Lifestyle’s Location Location Location Australia explains the benefits he sees in being what he calls a borderless investor.
We are also joined by Carolyn Boyd from Domain who has been looking into the horror stories surrounding building contracts – like the one we mentioned a few weeks ago with Samantha Powers – and Carolyn says it is about the quality of workmanship so she has some tips that will help choose the best people to engage.
Michael Yardney has some great advice on how to avoid paying too much when you buy. He will explain the benefits of employing ‘knowledge detachment’.
And our success story this week is from Wendy MacDonald who calls herself a “developer-grandmother”. Hear how she turned a Brisbane property into a 10 room student accommodation complex and is now developing a 20 unit 5 story complex on the site returning her a whopping $700K plus profit.
Kevin: When a purchaser gets involved in negotiating for a property they’ve fallen in love with, emotions quite often can rule logic. It’s very easy to get caught up in the moment and end up paying more than perhaps you should do.
As either a home buyer or a property investor, it’s critical not to get carried away with your emotions but instead approach the negotiation process from a position of knowledge detachment.
That’s according to Michael Yardney from Metropole Property Strategists who joins us. Hi, Michael.
Michael: Hello, Kevin.
Kevin: Michael, explain a little bit more about that, because it’s one of the areas where a lot of property investors can go wrong.
Michael: Kevin, unfortunately, the market is creating a lot of emotion at the moment – the old emotions of fear and greed: fear of missing out, greed of wanting to get in and make the market work for you.
Now, there’s nothing wrong with either being fearful or being greedy; the question is, though, am I allowing that to rule the way I’m negotiating, and am I making it work for me or against me?
Kevin: I sometimes wonder, too, Michael, with the growth of the number of auctions right around Australia whether this is becoming even more critical.
Michael: It is, very much so. Only today, we were in the situation where we were forced to make an offer before auction. In most cases, if I was a vendor or if I was an agent, I would be suggesting the vendor go to auction and see what the marketplace is going to offer. because in our strong environment at the moment they’re getting some very good offers at auction.
But sometimes for personal circumstances, the vendor doesn’t want to take that risk or want to pay for the marketing campaign, so they start a campaign, and then agents are currently moving to having these little private auctions – these Dutch auctions, these blind auctions, these one-off bids. It actually puts you in a very different negotiating position that can be as nerve-wracking and scary for a buyer as an auction.
Kevin: Michael, help us. What are some of the rules of engagement?
Michael: The first thing you have to do is do your homework first. Rather than flying blind, make sure you understand that if it’s a pre-auction offer, depending upon how soon before the auction it is, it’s going to be an unconditional sale, as well. Make sure you’ve done all you’re due diligence. Make sure your solicitor has checked the contract. Make sure you understand what the property is worth. The best weapon coming into negotiation is knowledge, having the knowledge of the marketplace. Be armed with that.
I guess the next thing is be prepared in this strong market to lose because, unfortunately, for every auction currently there are three or four losers. That doesn’t mean you’ve lost in the long-term; it means this property is just not going to be the one for you, and you have to move on to another one.
Kevin: Of course, good agents will play on that fear of loss.
Michael: Of course, they will. They’re good readers of emotions. That’s the reason why a lot of people employ buyer’s agents like the team at Metropole to help a little of that emotion out. Agents are taught how to negotiate. They’re taught to read your emotions. Most buyers don’t understand how to handle that properly.
One of the things I really don’t like is this concept of a Dutch auction where the agent pitches two or more potential purchases into making, I guess, what are blind bids. That’s exactly the position we’re finding ourselves in as we speak. I know you know that just before I got on the line with you we were negotiating with an agent who is saying, “Put in an offer,” but he won’t tell us what the other offers are.
One of the ways they’re doing that sometimes is saying, “That’s it. You have one chance, one bid in a sealed envelope. They’re going to be opened up at 4:00 this afternoon, and the best bid wins.” I think I’d rather be at an open auction where I can see what the other people are doing and the fact, Kevin, that there are other people. You don’t always know that, do you?
Kevin: No you don’t, Michael. It’s a difficult situation. What do you do in that position? You obviously have to put your best foot forward if you want it, but then as you said earlier you’ve got to be prepared to lose.
Michael: Exactly right. I think when that situation occurs, you have to read the agent and see if it’s true. You have to also make sure that he doesn’t use your offer to push somebody else higher.
That, again, is where it’s sometimes worth having a buyer’s agent on your side representing you, because sometimes they go backward and forward a number of times and other times they say, “No. Just once only.” Then that’s the time when you actually do have to put your best offer forward, accepting the fact that if you got it at that price, you would be happy to accept it and if not you’ll go on.
Something else really interesting happened this weekend. Can I share it with you?
Michael: One of our buyer’s agents was looking at a property, and he knows the selling agent was asking somebody to get it on the market before auction during that marketing campaign. Interestingly, he got an SMS – which I assume all the other people interested got – saying, “The property is now on the market. We’re prepared to sell before auction, and the offer we received was…” and they actually even disclosed it. We were really happy we weren’t in the position that we were the ones who made it. I thought that was very wrong.
Kevin: That seems very unprofessional, I would have thought, Michael.
Michael: That’s the way we felt, as well, and we’re happy that we weren’t the ones who were called out that way. I bet the person who made the offer didn’t know that they were being used to get us to make a higher offer. How would they feel if they found out?
Kevin: They would feel terrible. As we can see there, Michael, there is certainly a lot of emotion involved. It’s always best if you negotiating to get someone on your side. Think about using a buyer’s agent – people like Metropole Property Strategists.
My guest has been Michael Yardney from that wonderful organization. Michael, thanks again for your time.
Michael: My pleasure, Kevin.
Kevin: Bryce Holdaway from Location Location Location Australia on Foxtel joins me once again. He’s also a partner in EmpowerWealth.com.au.
Bryce, talking specifically about the Sydney market, do you think it’s too late to be getting into the Sydney market because it’s so hot?
Bryce: For anyone in particular who is thinking about being a first-time investor under the fear of missing out, I’d certainly suggest Sydney isn’t the place for them to be dipping their toe in the water. They’ve had double-digit growth, above-average annual growth, for the last couple of years, and with over 80% clearance rates, I think there’s a challenge in that it might be well and truly getting to the top end of the cycle.
Back in the boom of 2001 and 2003, Sydney did something similar, but then from 2004 to 2007 it tracked sideways for quite some time. I think that would have been a challenge for the people who were holding real estate that time period.
Kevin: Is Sydney unique in that?
Bryce: No. I guess Australia is not one big marketplace. Perth in particular is in for a bit of a tough time, but it has been going great over the last couple of years. I think if as an investor, you see Australia as not being just one big marketplace but made up of hundreds of submarkets, if you’re prepared to be a borderless investor and move your money around the cities and states that have the best chance of being in the right part of the cycle, over a period of ten years, you can give yourself the best chance of getting the maximum out of the market rather than just staying in your own backyard and waiting for time to just be your friend.
Kevin: It is very comfortable, though, to buy in your own backyard. It’s an area that you know, you’re familiar with it, and therefore you’re minimizing your chances of making a mistake. To become a borderless investor, do you recommend traveling to the area as well as doing your research?
Bryce: If you’re not getting professional advice or professional help, absolutely. Buying property on the Internet I reckon is fraught with danger. I’ve mentioned it to you before. It’s like checking out your friends on Facebook: they only put the good stuff up. You actually need to be on the ground to see what the market conditions are like, talk to the agents, and get a feel for the area for yourself.
But if you’re getting professional advice, I help clients buy interstate and I would say seven out of ten don’t actually see the property before they buy. They well and truly see it afterwards but not before.
Kevin: For someone who wants to become a borderless investor, what are the research steps you have for them, Bryce?
Bryce: First of all, I’d actually suggest that you look at the country from a telescope perspective rather than a microscope perspective. What I’m doing is using history as a precedent. I mentioned before that Sydney in 2001 to 2003 did really well, but in 2004 to 2007, it tracked sideways. If I have a look historically, I can see from that 2004 to 2007 period Brisbane actually went really well. Then after 2007, it dipped down a little bit, and then from 2007 Melbourne started to do really well.
I think that something that we can learn from the past is Brisbane, for example, tends to lag behind the two bigger cities of Melbourne and Sydney historically. That’s the case right now, where Melbourne and Sydney have done well over the last two or three years and Brisbane hasn’t.
I think there’s an opportunity to see that history may repeat itself in that regard and to look to that city before you start getting specific about what suburbs and what types of property you want to buy.
Kevin: Looking at Brisbane for a moment, it may not have performed as well as Sydney and Melbourne in the short-term, but over the long-term it’s a fairly consistent performer, isn’t it?
Bryce: It is, but over the last five years, it has done next to nothing. I’m buying properties now for clients where they are actually buying at not too dissimilar prices to what someone paid back in 2007 and 2008. They’ve been tracking sideways for a little while, but I think the part of the cycle is right and you’re actually getting really good yield in that market, as well.
It’s never a bad idea to hold good quality real estate in Sydney and Melbourne because they’re world cities. They’re major metropolises with plenty of opportunities. Jobs are always at a peak in those two cities.
But right now, I think for those experienced investors who have maybe enjoyed some of the benefits of Sydney and Melbourne over the last couple of years or even someone who is dipping their toe in for the first time, potentially a city like Brisbane might offer them better opportunity for the next couple of years.
Kevin: One of the other lessons you’ve learned, as well, is there is no one market even in Brisbane. You can’t just say that all Brisbane stock is good stock. There are some good areas and some bad ones.
Bryce: I would agree. I would certainly prefer to stay closer in to moving further out, because if Brisbane starts to get a bit of sentiment to where people are moving there, you might get some good movement in the next 12 to 18 months, but long-term, although Brisbane is largely becoming a metropolis where more multinationals want to locate there, they’re still lagging a little bit behind the job opportunities that you can get in Melbourne and Sydney. I would certainly want to stay closer into the CBD rather than getting caught up on being too far out.
Kevin: Always good talking to you. Bryce Holdaway, thank you very much for your time, mate.
Bryce: Pleasure, Kevin. Any time.
Kevin: Three or four weeks ago, you might recall on the show we had a talk to Samantha Powers who had a horror story when she went through a building contract. If you missed that, go back and have a listen. It’s a two-part interview. We did that sometime in mid-May. Just have a look for that. You’ll find it there.
It prompted me to think about how you go about getting a good tradie, and Carolyn Boyd has been looking into this for me. Carolyn is from Domain.com.au.
Hi, Carolyn. Nice to be talking again. How are you?
Carolyn: Hi. I’m great. Thanks, Kevin.
Kevin: Good. Now, you have some statistics there about complaints with builders and building contracts.
Carolyn: Yes, quite interesting. These are from New South Wales, and they look from Fair Trading at the number of complaints they’ve had come in through their doors and just what they’re about.
67% of building complaints are actually around the workmanship. It’s not that people aren’t finishing the job or there’s some contractual dispute; it’s that the job is getting done but not to the standard the home-owner or investor expects.
Kevin: A lot of the people I talk to have great frustration when a builder will start and then move on to another job and maybe slow down when they come back. That’s a frustration for people.
Carolyn: It certainly is. I think that’s probably the builder lining up that number of jobs to ensure they have some income coming in, but it’s perhaps sometimes finding they have too much on their plate.
Another conversation I’ve just been having recently is around the nature of these bite-size jobs. You might get a tiler or a plumber to come in and do a job, and because they’re going to be at your house just that one and only time, there’s not that feeling of that relationship that you need to do a really great job and look at all those tiny things that make a difference that we as home-owners notice, but potentially they’re sometimes in a rush to get on to the next job.
Kevin: It is a reality. We get tradies in from time to time, and we also sometimes have to go through building contracts. What are your suggestions about finding good tradies?
Carolyn: The first thing is to try to find some who you can use again and again, so you do build that relationship. It is a bit hard. Isn’t it? Sometimes you can luck it. You can look through the local paper or the Yellow Pages and find them. But I would always start by asking your family and friends who they’ve used before and to get recommendations if those people are any good, and maybe get them out to do a small job as a starter.
You can ask tradespeople or, in fact, your suppliers. If you’re off to a tile shop or somewhere like that, they might recommend to you some of their trusted tradies who they know do a good job, and certainly, I’ve found that to be a good way to find them. If that’s not working, you might then go to the local newspaper or the Yellow Pages.
One thing that sometimes we forget to do is check that our tradespeople are actually licensed, particularly when you’ve just pulled them out of the phone book. You can usually easily do by searching online in your state or territory to find whether they actually do have a building license.
Kevin: As well as licensing, it’s also important to ask about insurance, as well.
Carolyn: Yes, it is. I guess we assume people do have that, but that’s right. There’s no harm in asking, “Please show me,” and if this person is unable to show you evidence of that, then probably move on to the next one, I would suggest.
Kevin: Yes, indeed. I know in well-run property management departments, they keep a file on all the tradies they use to make sure that their insurance covers are up to date because it can actually cost you quite a bit of money if you don’t really tick that little box off.
Carolyn: Absolutely. I think also you probably need to beware if you’re going to be selling your home within the next few years that it could come back on you as well – not only that it could cost you some money, but then if you’re selling that property and there are some issues, it’s worth thinking it could be a bigger ramification than you have in mind.
Kevin: If you are looking at getting some work done around the house, another tip for you is to make sure that you get everything approved. Quite often, it’s okay if you don’t intend to sell. Well, it’s not really okay, but it can be okay until it comes time to sell, then it can come back to bite you big time.
Carolyn: It can, and the thing is, too, it’s sometimes surprising things that you don’t realize need approval. One great example of that, believe it or not, is even something as simple as a backyard cubby or a backyard shed.
There are a couple of great stories that I’ve heard – not great for the person involved – where a family knocked down a shed, rebuilt in exactly the same location and the same size, but, of course, the planning laws had changed. The local council wasn’t happy and took them to court because they had erected this new structure and it was actually too close to the fence, even though the existing one had been okay because it had been there for a little while.
Exactly the same problem with building a backyard cubby: dad goes out on the weekend, builds a cubby with the kids, the neighbors complain, and they end up in their local council applying for a DA.
Kevin: The bottom line: always do your homework and always check to make sure that everything is covered.
Carolyn: Yes, absolutely. Even the smallest things, it probably doesn’t hurt to think, “Oops, do I need to get approval for this one?”
Kevin: Yes, exactly.
Carolyn Boyd is a property journalist and keen follower of the Australian housing market. You can tell she has a great source of knowledge, and she also writes for Domain.com.au.
Carolyn, always great talking to you. Thank you very much for your time.
Carolyn: My pleasure, Kevin.
Kevin: A few weeks ago, I was talking to Margaret Lomas from Destiny Financial Solutions and suggested then that it might be good for us to get together again and have a talk about some of the suburbs around Australia where Margaret is seeing good growth or good potential – or what I tend to call, Margaret, suburbs that are coming to life.
How are you?
Margaret: I’m good. Thank you.
Kevin: Good, and, of course, your show on Sky TV, Property Success with Margaret Lomas, going very well.
Margaret: Yes, absolutely. We’ve started the new season, and it’s always great to be in a new season. It’s Seven years now, so I think the viewing public are quite enjoying it.
Kevin: Yes, it’s great, and I’m always delighted to be a part of it, too. Margaret, thanks for involving us in it, too.
Which suburbs are you seeing coming to life around Australia?
Margaret: Look, let’s start down in Melbourne because I know people are a little bit concerned about Melbourne at the moment because of the oversupply of apartments in the city, and they’ve got every good reason to be concerned about that. There is an estimated 85,000 apartments that are going to come online within the next seven years, and that’s just in the CBD alone, so you can imagine what that’s going to do to that market.
It’s going to flood it with properties, but it’s also going to flood it with rentals. So even if you manage to maintain the value in the properties you’re buying, you’re not going to see a very good rental yield because there are just going to be too many of them on the market and available.
I like a couple of the suburbs that are out in the southeast, and the reason I like those properties is because there are a couple of areas there where we’ve really seen a bit of a demographic shift in the number and size of families that are living out there, and we’re also seeing the local councils responding to that shift in demographics with a whole lot of infrastructure, including things like those big shopping centers, the big home buyer centers, plenty of facility and amenities.
The places I’m liking at the moment include Cranbourne – that’s Cranbourne North, Cranbourne West, and Cranbourne itself. But I also like Carrum Downs, which I think is one that’s stuck in there behind Seaford, just down from Patterson Lakes, and it’s a lot cheaper than those two areas, yet still close enough to some of those main arterial roads that lead back into the city.
Kevin: Excellent. I hadn’t heard of that one before.
Margaret: I know. I’ve always got properties or areas that you haven’t heard of.
Kevin: I know you do. You’re a surprise packet. Where to next?
Margaret: Okay, next is up in your stomping ground. Now, I’ve been liking, of course, Deception Bay for quite some time, but I think what’s happening up in Deception Bay is it’s running just that little bit hot because a lot of people are looking there.
So I’m moving out toward Rothwell – which is a little south of Deception Bay, and that’s not quite as overheated as Deception Bay at the moment – but also down into Mango Hill. Mango Hill is right there on the main road, the Bruce Highway leading right back into the city.
You can still get into the mid $300,000s there with good rental yields of around about 6%, and because of its proximity back on to that freeway, I think what we’re going to see is an issue like we have here on the Central Coast where we have Kariong, and it’s a suburb that always does really well because its situated right there on the main freeway back down into the city, so I’m really liking that.
To a lesser extent, Kippa-Ring – up around that area is another area that I think is going to be one that people really should watch.
Kevin: Yes, that Redcliffe Peninsula is a real surprise. There are some great properties up there, and the lifestyle is so good, too, Margaret.
Margaret: Not a surprise to me because I always knew that Redcliffe, years and years ago, would do really well. All you had to do was go there and see what kind of a lifestyle you could have and know that it’s only about a 17-minute drive back to the airport to know that it was going to do well.
But often when something is right before you know, it’s difficult to see the opportunity – and that includes areas like Cranbourne and the places I mentioned down and around Melbourne. The locals always look at those areas with disfavor and don’t think they’re going to do very well. But if you’re coming from outside of the area, you don’t have that same prejudice with you, so it’s much easier to see all the positives rather than the negatives.
Kevin: Excellent. There’s a snapshot for you on a few properties for you to have a look at from the expert Margaret Lomas at Destiney Financial Solutions.
Margaret, thanks again for your time.
Margaret: Thank you.
Kevin: It’s my pleasure now to be talking to property investment and business coach based in Sydney Peter Spann. You can see him at his website – lots of great information there, too, about what Peter does and how he can help you if you’re looking at getting into property – PeterSpann.com.
Peter, welcome to the show. Thanks for your time. I’m keen to talk to you about properties with a twist, how you find them, and what it is you look for.
Peter: What I’m looking for in a property is its potential growth. I’m always looking for something that I can value-add to, either by renovating, renewing, rezoning, finding another application for it, expanding it, or collapsing it.
My key thing that I’m looking for is something that I can add value for and therefore accelerate its growth. But the second underlying thing that I’m always looking for is growth over the long-term. I’m prepared to sacrifice yield for growth. I’m not a cash-flow investor; I’m very specifically looking for value-adding and growth.
Kevin: What do you believe about buy-and-hold? Or are you into flipping property?
Peter: I’m not generally a flipper. I will flip if I can see a profit – and a profit that is likely to outweigh holding it for an extended period of time – or in a market like we find ourselves at the moment, where you can buy a property, add some value to it, and come back six months later, and it’s literally grown 30% to 40%.
I can sometimes sit there and wonder, “Wow, is that likely to continue?” My answer is probably not. Therefore, if it’s likely to go flat for four or five years, why not take advantage of the massive and rapid growth? But generally I hold for the long term.
Kevin: Talking about profit, what do you think are the keys to profiting from property right now?
Peter: That’s a very difficult question, and if somebody could come up with a definitive answer to that, I’d love to hear it.
Kevin: I thought it was worth asking anyway, Peter.
Peter: Realistically, I think you can’t be afraid in a fast-moving market like this, because nobody can tell us how long it’s going to last. I remember in the 1990s, everybody was saying, “It’s going to collapse, it’s going to collapse, it’s going to collapse,” and I was still investing, still investing, still investing, and then it went on for 15 years. If I had gotten scared after three or four years, I would have missed out on a whole decade of exciting growth.
You can’t get scared, but you can’t get carried away either. Even if you’re going to auctions, and you’re missing out, that’s not the worst thing on the planet. You have to stick to your guns, you have to stick to your valuations, and eventually things will come up that you can buy.
Kevin: Peter, what’s the best deal you’ve ever done?
Peter: I think the best deal I’ve ever done was a property that was actually passed at auction. It was rainy Sunday afternoon, terrible rain in Sydney. I’d just been to an apartment that had sold for $2.2 million, and this was a three-bedroom house. I actually literally went along to the auction to see what would happen to this house.
Nobody turned up at the auction. It was passed, and I went to the agent, and I said, “What’s it worth?” He said, “I don’t know what it’s worth, but I can tell you what I’ll sell for. If you put a bid in over $2 million, we’ll sell it to you.”
I said, “$2 million and one dollar,” and he said, “Sold!” I had it revalued by the bank two weeks later. The bank valuation was $3.5 million. I sold it ten years later for $7.2 million. I think that’s probably the best deal I’ve ever done.
Kevin: I would think so. On the flip of the coin, what’s the deal that probably taught you most about what not to do?
Peter: It probably wasn’t a deal; it was more the fact that we were doing a development, and I didn’t check all of the zonings and requirements of the council. It turns out we actually built the roof two metres over the maximum height requirement. The council sued us and forced us to actually take the roofs off the property and rebuild them, and that cost me hundreds of thousands of dollars. That was just a very good lesson in checking the zoning, checking all the council requirements, and making sure you have town planners and whatnot onside.
Kevin: Pete, I’m going to ask you a question about auction, because in this market in auctions, particularly in Sydney, it’s going through the roof. In this market, would you buy a property at auction?
Peter: I have been. I haven’t been buying a lot, I must admit. If you go back five years, you could go to an auction and probably one in five that I would be going to I might be a genuine contender to buy. Now it’s probably something more like one in 25, one in 30. I am going to auctions that are just astounding me with some of the prices that they are getting.
But I am buying. I’m buying less than I have in the past, but as I said, I’m not getting carried away. Sometimes on the night, people just don’t get excited, or for whatever reason they don’t see the value that I see in a property. I’m not saying you can pick up a bargain, but you can pick up a property that I believe is reasonably priced, given the market.
Kevin: Yes, provided you know your values before you go in and don’t get carried away.
Kevin: Peter, we’re out of time. Thank you so much for spending some time with us today. It’s been very, very helpful. We’d love to have you back in the show at some time in the future again.
Kevin: Peter Spann has been my guest. The website is PeterSpann.com. Check it out for yourself.
Kevin: Wendy MacDonald calls herself a developer grandmother. She lives on the Sunshine Coast in Queensland, works full-time, and completes development projects part-time. She got experience by working for a land developer full-time for five years as a project manager and completing different projects with joint venture partners and investors.
When she came to Australia from New Zealand in 2005, she decided she wanted to become a property developer. In 2007, she bought a property in Mitchelton, which is eight kilometres northwest of Brisbane CBD, and converted the existing house from an eight-room boarding house to a ten-room student accommodation complex. Now, she is currently obtaining a development approval on that site for a 20-unit five-story building.
She joins me today. Hi, Wendy. How are you?
Wendy: Well, thank you.
Kevin: Good. Tell me, Mitchelton: why did you choose that area?
Wendy: At the time I purchased Mitchelton, I’d just been through a divorce and I could have bought a nice freehold apartment, which wouldn’t have made me much money, or I could’ve bought a development site, which I felt would potentially make me lots of money.
Kevin: So that’s pretty much what attracted you to the area? You saw the development potential in it?
Wendy: Yes. I suppose it also met my budget. At the time the Brisbane City Council had announced that there was going to be a number of major regional activity centers in Brisbane, and Mitchelton was one of those. I thought there would be a high likelihood that the site could get rezoned to higher density, and that’s exactly what’s happened.
Kevin: We’ll talk about prices in just a moment, because I’d love to dig a little bit deeper there. In the brief that you gave me, you talk there about strategic sites. Could you tell me what a strategic site is and how you find them?
Wendy: A strategic site to me is any site that’s going to increase in price – because it has development potential or it may be because of its location. I personally don’t buy any property unless it fits into my overall plan and how it’s going to help me achieve my overall goals.
In terms of how you can find them, I suppose the Internet is one way, but in a really hot market, often properties are actually sold before they’re even listed, so being on real estate agents’ databases before they actually market it is one of the ways of being able to connect with real estate agents. The thing is if you have a really good relationship with a real estate agent, they may call you before they actually list it anyway.
Kevin: You obviously had a good relationship with an agent who helped you find this one. Do you find that some agents are really attuned to what developers want and some aren’t?
Wendy: Yes, most definitely, and I think one of the ways to connect in with those agents is really by referrals.
Kevin: Tell me about this particular site in Mitchelton. When you found it, how sure were you that you would be able to redevelop it? In other words, you went in and did your due diligence, but was there any risk attached to that?
Wendy: I think there’s always risk with any type of development, because it’s not until you literally put the bulldozer on the ground that you know what’s underneath the site. Sometimes there can be problems with services, and particularly in the Brisbane City Council with the storm water. If those pipes are not actually in your site, you may need to get your neighbor’s approval to be able to develop a site, and if a neighbor for any reason decides to withhold that approval, you may not be able to develop it.
Kevin: I said in the introduction that you initially converted it to an eight-room boarding house, and now you’ve gone along and got a DA for that. Tell me – because I hear some horror stories about boarding houses because of the types of tenants you get in there – are you managing that yourself?
Wendy: Yes, I do.
Kevin: And that’s not a problem for you at all?
Wendy: Well, when I first moved from New Zealand, one of the things I did to educate myself was to get my full papers to get my real estate licence. So I have a sound understanding of all the council and government regulations around student accommodation or boarding houses. I think it’s vitally critical to keep on top of it.
The first thing is that you need to have a fully compliant fire safety management plan. I have house rules. All my tenants are on REIT leases, all my tenants pay bonds, and I absolutely keep on top of the situation.
Kevin: Well done; that’s good. I want to dig a little bit deeper into prices now. Tell me what you initially paid for the site, what it cost you to convert it, and what you think will be your end result now that you look like getting a DA approval.
Wendy: I paid $700,000 in 2007, and I suppose I expect to double my money at least.
Kevin: That’s double to $1.5 million or thereabouts. Are you going to sell it with the DA, or will you develop it yourself?
Wendy: At this stage, I’ll probably sell it with the DA, but I’ll certainly review that situation when I get that. When a site is sold, it’s always sold on yield. The end price depends on the number of units. That’s why it’s so important to be able to get a really effective design on the site so that you can get the most number of units. But you also need to be able to design something that’s going to be easy to build for any builder or developer who comes along.
Kevin: It’s a five-story building – 20 units, as I understand it. What stage are you at now with the DA approval?
Wendy: I’ve spent quite a number of months finalizing the design, and the key for me has actually been getting the rubbish off-site, interestingly. Until I’ve been able to solve the issue of having a rubbish truck come onto the site, turn around, and be able to leave in a forward motion, I haven’t known how much space it would take up.
I had to know how much space the rubbish truck would take up to work out how much space I have left for parking, and once I know how much for parking, I know how many car parks I can have. Once I know how many car parks, I can know how many units I can have, and then I can work out what the final price is, or the potential selling price.
Kevin: We’re looking at 20 units. It’s a site valuation, so you’re looking at probably $70,000 per unit site. Is that the going figure now?
Wendy: I would say $70,000 to $80,000, and I think that’s going to depend on the market at the time, what else is available in the market, and what else is being built in the area.
Kevin: Just before I let you go, Wendy, it’s a great story, and I really would appreciate you telling anyone who is listening to this who probably wants to go in a similar situation like you and get into some kind of development, what are your major tips to help them get along that path?
Wendy: I think if anybody wants to get involved in development, really, they need to first of all decide to take control of their financial destiny and set some goals, and they should be written goals. I think they then need to develop a plan of action or a strategy for how they’re going to get there, and they need to create a team, because development is very much a team sport. By the team, I mean tradies, consultants, professionals such as lawyers and accountants, and people like myself who offer coaching and mentoring services to help people.
Kevin: How can anyone who wants to get in touch with you do that?
Wendy: I have a site called PropertySuperstars.com.au. On my site, I’ve actually set up a blog so people can watch my development journey, and I’m very happy to share my learnings and my tips along the way.
Kevin: Of course, we contacted Wendy through a great association we have with Matt Jones, who runs a meet-up group, as well.
Wendy: Yes, that’s right. I think the meet-up groups are invaluable for meeting others who are either potential investors, or they could be clients, or in my case, some of the people I’ve met at the meet-up group have become friends.
Kevin: Wonderful stuff. Have a look for it. Just Google Matt Jones, and you’ll find it. If you want contact Wendy directly, you can do that through her website, PropertySuperstars.com.au.
Great talking to you, Wendy. All the best with your future, and thank you so much for your time.
Wendy: Thank you so much to you, Kevin.