<\/p>\n
We feature a chat with Jo Chivers<\/strong> from Property Bloom about how she has developed her own portfolio and imparts that knowledge to her clients. Like all successful people, Jo freely shares her experiences with us.<\/p>\n <\/p>\n Kevin:<\/b>\u00a0 There is a very big step between becoming a property investor and becoming a property developer. But you know, it doesn\u2019t have to be as difficult as it sounds. When we think of property developers we think of those big high rises. It doesn\u2019t necessarily have to be that complicated.<\/p>\n I\u2019m drawn to an article that was written by Jo Chivers from Property Bloom where she gives some great advice about getting started. She joins me as my guest.<\/p>\n Good day, Jo.<\/p>\n Jo:<\/b>\u00a0 Good day, Kevin. How are you?<\/p>\n Kevin:<\/b>\u00a0 Good. I want to get your tips on getting started in property development, but just before we do that, tell us how you got involved in it. How did it start for you?<\/p>\n Jo:<\/b>\u00a0 Sure. I started investing \u2013 gosh \u2013 15 years ago now. After I\u2019d educated myself a little bit, I started with an off-the-plan strategy. My first investments were off-the-plan apartments in Sydney. Back then in 2000, I was very lucky because the timing was great. We had that nice little lift-off and that boom that was happening from about 2000 to 2003 or 2004.<\/p>\n I got into that strategy \u2013 and I actually repeated that probably four or five times \u2013 but what I did find is that when I was settling those properties in Sydney, they were very negatively geared. But I also noticed that while I could create some equity in that off-the-plan strategy, it\u2019s a little bit different to how it\u2019s done today. Back then, the developer gave you a discount to buy in early, to buy off the plan, and then if you had the market rising at the same time, you made a nice little chunk of equity. When you settled you could draw that out and use that to go again.<\/p>\n That\u2019s exactly what I did. Obviously, I wanted to hold these properties and I found that they were quite negative, but looking into that strategy I found that also if I was making that much money, the developer must be making quite a bit, as well. So that got me really interested in developing property.<\/p>\n After I settled the fifth property, I realized \u201cOkay, I can\u2019t keep having these negatively geared properties in my portfolio. I need to find something that\u2019s a bit more cash flow positive.\u201d That\u2019s when I looked outside of Sydney and found a lovely big regional area in the Hunter Region.<\/p>\n Kevin:<\/b>\u00a0 Where was that one? What was your first development?<\/p>\n Jo:<\/b>\u00a0 The first development was in the Hunter. I went up there to do my research, and I spent a few weeks really researching the whole area and region. I found a city, then just honed in on that particular city and did a lot more research \u2013 talked to all the agents, got to know the area a little bit and the different suburbs within that city or town. Then I bought a big piece of land. It was 1000 square meters, had a little cottage on it. I renovated the cottage and built the duplex behind it and subdivided.<\/p>\n Before I did that I\u2019d researched with council exactly what the requirements were and what you could and couldn\u2019t do up there. Because of the large lot sizes, there was a lot more opportunity and also it was so affordable compared with Sydney.<\/p>\n Mind you, that very first development that I did \u2013 gosh \u2013 I didn\u2019t really know what I was doing, but it taught me so much along the way. I learned a lot simply by asking lots and lots and lots of questions. And the best way to learn is great study, but the best way to learn is to actually get in there and do it. You really do come away with a lot more information and experience.<\/p>\n Kevin:<\/b>\u00a0 At that time, too, the market was a little bit different from what it is now, and you could actually make some mistakes and the market would pretty much take care of it because it was an increasing market. You probably have to be a little bit more careful nowadays, would you think, Jo?<\/p>\n Jo:<\/b>\u00a0 Well, yes. In hindsight now looking back, I actually did make some nice equity on that but it wasn\u2019t because the market was rising; the equity was created because I added value to the property. By adding value, I mean we built the duplex, so it actually ended up being three dwellings on that piece of land and then we subdivided. That\u2019s adding value. That market up there when I started that development was actually quite flat at the time. But through that development process, the equity was created.<\/p>\n That\u2019s why I actually think developing property is a great way for investors because you\u2019re actually building in a little buffer of equity through this development process. It can be quite a safe strategy, in a way.<\/p>\n Kevin:<\/b>\u00a0 I\u2019ve just done a quick calculation. You\u2019ve probably been doing this for 15 to 16 odd years now. You would have seen a lot of changes in the market. The one you just mentioned there about how the market dynamic has changed, has that been the biggest change you\u2019ve noticed?<\/p>\n Jo:<\/b>\u00a0 We\u2019ve had so much happen over the last 15 years. Obviously changes come in many ways \u2013 so changes in the market and the economy. We\u2019ve seen the GFC, we\u2019ve seen the credit crisis, we\u2019ve seen the mining boom, we\u2019ve seen the mining slow-down. We\u2019ve seen a lot of changes in the market,<\/p>\n But also the changes in construction methods, so to speak, or costs \u2013 they evolve, as well \u2013 and ways of going about things. I\u2019ve now completed over 100 developments, and over the years, I\u2019ve basically been able to fine tune the process. I\u2019ve cut out a lot of these time-wasting processes that I was doing in the beginning.<\/p>\n Yes, there\u2019s been a lot of change over this last 15 years, but essentially what you do is add value through development. The strategy is still the same; it\u2019s just the process, I guess, that I\u2019ve been able to fine tune over that period of time.<\/p>\n Kevin:<\/b>\u00a0 Is that a skill you\u2019ve developed? Have you learned that? You can\u2019t add value all the time unless you really know what you\u2019re doing.<\/p>\n Jo:<\/b>\u00a0 Well, you can\u2026<\/p>\n Kevin:<\/b>\u00a0 Good, tell me.<\/p>\n Jo:<\/b>\u00a0 \u2026If you know the area. The area doesn\u2019t necessarily have to have the capital growth but it\u2019s all about the numbers. You buy a piece of land \u2013 most recently, we\u2019re doing a lot of work around Newcastle \u2013 and you build just a duplex. A duplex is an attached dwelling, so you\u2019re actually building two dwellings \u2013 so two, three-bedroom dwellings \u2013 but they\u2019re attached as part of a duplex.<\/p>\n But you can Torrens title subdivide that. By Torrens title subdividing the land, you\u2019re actually only paying half the amount of the land for each of those dwellings. That\u2019s where the equity is created; it\u2019s in that subdivision process \u2013 as long as the numbers are stacking up.<\/p>\n You just have to run the numbers first. You look at your land costs, you look at your costs to build the duplex, the cost to subdivide it, and then there should be a chunk of equity there \u2013 depending, of course, on what the end value will be in that particular market. You need to research what it is going to be worth when we finish \u2013 that three-bedroom, two-bathroom, single-garage, detached villa \u2013 and work back from that number.<\/p>\n Kevin:<\/b>\u00a0 You said there you\u2019ve done over 100 developments, so this is probably going to be a hard question for you to answer, but what\u2019s been the best one?<\/p>\n Jo:<\/b>\u00a0 It is a bit hard. We\u2019ve done some larger developments, but it\u2019s interesting; what I\u2019ve found is that sometimes a smaller development can give you the same return on investment as a larger development, but you\u2019re not having to outlay so much capital.<\/p>\n Really, what I\u2019m finding at the moment is around the Newcastle market, it\u2019s a good market. There\u2019s been a lot of spend in that particular area. There\u2019s a lot of infrastructure going on. There\u2019s a lot of gentrifying, if you like, of the city. And they\u2019re making it more attractive for people to move to Newcastle. It has the beautiful beaches. There are a lot of reasons why people can work there, and a lot of people are working remotely these days anyway, so why not live in a more affordable but beautiful city two hours from Sydney?<\/p>\n What I\u2019ve found lately with the duplex developments around that particular city is that the equity we\u2019re creating is far higher than what we did, say, on a six-unit project a few years ago. It\u2019s interesting; I\u2019d say the best developments that we\u2019ve done so far are these dual-occupancy developments that we\u2019re working on now around Newcastle.<\/p>\n Kevin:<\/b>\u00a0 This next one might be easier because I\u2019m going to ask you what\u2019s the worst one you\u2019ve ever done? That\u2019s probably the one that you learnt most from or that is probably still prominent in your mind.<\/p>\n Jo:<\/b>\u00a0 Yes. I do get asked that, and it\u2019s a good question to ask because really not everything is rosy all the time. The worst development? We had council we were working under that went into administration. We had two DAs that had been in Council for far too long, and they were just taking so long to process. They were both for three-unit projects.<\/p>\n When the administrator took over, they brought in an Independent Planning Panel. So the town planners who had been working on that DA basically got pushed aside and this new panel of planners from Sydney and all over the different councils came into assess the DAs that were still in council.<\/p>\n They looked at ours and then they basically said, \u201cNo, we\u2019re not going to accept a three-unit project for these two,\u201d and they cited a whole heap of weird and wonderful reasons, which really didn\u2019t suit that location.<\/p>\n We had to go back to a dual occupancy, so we had to redesign it, put two dwellings on each of those projects instead of three, so the equity creation was less than what we originally planned. However, we had two bigger dwellings and it still ended up a fairly good project for our clients.<\/p>\n That\u2019s an unknown. So council is always the unknown. Even though you have your requirements and we were meeting all of the DCP \u2013 the Development Control Plan \u2013 and L&P, it just came down to just being unlucky at the time with this administration process.<\/p>\n Kevin:<\/b>\u00a0 Unfortunately with a situation like that, I guess with someone new coming in, they feel like they have to make those kind of changes or those statements, otherwise there\u2019s no need to have them there really. That\u2019s the difficulty.<\/p>\n Jo:<\/b>\u00a0 We could have fought it. We could have gone to the Land Environment Court, but that would have been very costly. So we just discussed the options for the client, and we decided to just go with the dual occupancy. That\u2019s a bit of an anomaly. Yes, I\u2019d have to say that\u2019s probably the worst project.<\/p>\n Kevin:<\/b>\u00a0 Thanks for sharing that with us. I know you do work on behalf of a lot of your clients, but you also do work for yourself. Do you have a buy-and-hold strategy, or are you a flipper?<\/p>\n Jo:<\/b>\u00a0 No, I\u2019m a holder. I love holding property. I hate selling it. I think we work so hard to get the property. And you know, time heals. Sometimes you find you\u2019re going through a market condition where \u201cGosh, there is an oversupply now. Shall I sell it and just be done with it?\u201d Or the rental market is not as good as it has been and you have to drop your rent.<\/p>\n Over time if you hold it for a long period, conditions change. I think if you\u2019ve bought in a decent enough area to start with, holding is a great strategy because you will see the returns after probably 10 years or so. And then after 20 years, you\u2019ll look back and you\u2019ll say, \u201cGosh, I wish I would have bought five of those.\u201d So I\u2019m definitely a holder.<\/p>\n Kevin:<\/b>\u00a0 Yes, good on you. I notice in reading your blog, too, and your tips about getting started in development, one of the things you say is that you need to take massive levels of action. Why do you think some people don\u2019t? Is it that they don\u2019t have the confidence to do it or they don\u2019t have the absolute belief?<\/p>\n Jo:<\/b>\u00a0 Yes. When I did my course, I watched as a lot of people who finished the course went on and signed up for more courses and more education and went off to another educator and did more courses, and they just didn\u2019t get into the market. I put that down to it has got a different risk factor. People look at things in a different way.<\/p>\n But the best way to learn is to really get into the market and give it a go. Sure, you might make mistakes, but if you do your research and you talk to enough people and ask enough questions, then you\u2019re going to learn far more from actually taking that action.<\/p>\n When I say massive amount of actions, I mean don\u2019t just fiddle around with a bit of research here and a couple of phone calls there. Make a commitment, hone in, focus in on a location, and become an expert in that location. But give yourself a time period. \u201cI\u2019m going to study this market for two weeks or three weeks.\u201d<\/p>\n By that stage, you\u2019ll have a good understanding of what the pricing and the conditions are, what the demand is, where it\u2019s coming from, what the economic factors are, what\u2019s going on that\u2019s going to add value to that location down the track. Then get in and buy something. Don\u2019t muck around because there are opportunities every day. Once you\u2019ve done your research you just have to back yourself. Get in there. Buy something.<\/p>\n If it\u2019s just a first investment, always look for a property that you can add value to later, whether that\u2019s through renovation or subdivision or adding other dwellings. You may not be ready to do that yet, but if you buy that property with the intention down the track to develop it, then you have that option down there.<\/p>\n Usually, you\u2019ll come back to that and you\u2019ll find that you make far more equity from that project after you revisit it in a few years because you\u2019ll have the benefit of the capital growth that may have taken place.<\/p>\n Yes, just get in and do it.<\/p>\n Kevin:<\/b>\u00a0 Research, of course, is so important, isn\u2019t it? You can be guilty of doing too much research. You can over research something and then almost become paralyzed. That\u2019s why I love what you just said about giving yourself a time frame and saying, \u201cTwo weeks, I\u2019m going to research this. Then I\u2019m going to make a decision \u2013 either go ahead with it or I don\u2019t and then go and find another one.\u201d<\/p>\n Jo:\u00a0 <\/b>That\u2019s right. Because it can be overwhelming. Particularly, if you\u2019re looking at too many locations, it can be really daunting and overwhelming. So you just need to focus on the area, become a bit of an expert, and then jump in and go for it.<\/p>\n Kevin:<\/b>\u00a0 You mentioned also about refining your process. At the end of each development, do you look at it and say, \u201cHow could I have done that better? What did I learn out of this?\u201d Is that what you call refining your process?<\/p>\n Jo:<\/b>\u00a0 Yes. We track the timing on every stage. There are so many different phases of a development, and we track the timing and we look at ways that perhaps if we could have got that DA into council earlier, we would have saved three or four weeks.<\/p>\n We can\u2019t really do much when the council is processing it because it is up to their internal resources, but there are a few different phases where you can definitely improve timing and cost. So we always look back over a development and we look at where we could save some time or save some money by doing it in a different way.<\/p>\n We discuss this very closely with our builder because sometimes we\u2019ve done so many developments and you just go, \u201cWe\u2019ll do that one again. We\u2019ll do it in the same way.\u201d But you can get a bit lazy doing it that way.<\/p>\n By looking at \u201cOkay, what if we change the configuration? What if we did put this different feature into the development? How much is that going to add value? And can we save costs by changing some of the fittings or changing the way we cut the size using a dropped edge beam slab, for instance, rather than so much retaining if it\u2019s required.\u201d<\/p>\n There are lots of ways you can actually fine tune the whole process. It\u2019s just a matter of focusing on each little stage and seeing how you can do it better.<\/p>\n Kevin:<\/b>\u00a0 Jo, I know you do a lot of investing around the Newcastle area. Do you move out of that area at all? Would you buy elsewhere in Australia?<\/p>\n Jo:<\/b>\u00a0 I would, but it\u2019s a really good region. The Hunter Region is massive, so we actually move around that region. When things change in one particular area, we\u2019ll go to a different area. I\u2019ve just found that it\u2019s been good and consistent and still has a lot of potential.<\/p>\n But yes, I would look in other areas. It\u2019s a diversification and you really should. My personal properties aren\u2019t all in the Hunter, for instance. I would definitely look around. It does take time to get your head around a different state and then honing in on a different city and then a different suburb. You need to then focus on that.<\/p>\n For me at the moment, there\u2019s so much potential there in the Hunter I don\u2019t need to at the minute, but I will moving forward. I have a mix personally in my portfolio of commercial property and residential. There are always possibilities everywhere.<\/p>\n If you look at the property clock and in what stage each city and state is in, they\u2019re all in a different stage of the market, so if you can buy in at the bottom of the market in a particular state, then why not?<\/p>\n Kevin:<\/b>\u00a0 Just one last piece of advice. I\u2019m hearing from a lot of people, and particularly young people, that they\u2019re really concerned about the current market. I\u2019m talking now about first-home buyers who are not willing to take that first step or they\u2019re really concerned about some of the information that\u2019s coming out.<\/p>\n What advice would you have for them? Let me ask you it this way: what advice would you give to your children about getting into property?<\/p>\n Jo:<\/b>\u00a0 I\u2019m already giving it to my two sons, who are 8 and 14. They\u2019re saving for their deposit.<\/p>\n My advice is to get into the market. Look, for a first-home buyer, you don\u2019t have to buy your dream home as a first investment. Start low. You can even have an investment property before you actually have your own home to live in.<\/p>\n I\u2019d just say get into the market. It seems really expensive and it seems crazy and out of reach, but you know what? In 10 years\u2019 time, you\u2019re going to look back and go, \u201cGod, that was so cheap. We should have bought that house at $500,000 and now it\u2019s valued at $800,000,\u201d or whatever the number is.<\/p>\n I would say save up, get your deposit together, and get into the market because really property has performed so well. It goes in cycles like everything, but long-term holding of property really from my perspective and my experience is a really good investment.<\/p>\n Kevin:<\/b>\u00a0 Jo, thank you for spending so much time with us. It\u2019s always a delight talking to you.<\/p>\n Jo Chivers from Property Bloom. Thank you so much for your time.<\/p>\n Jo:<\/b>\u00a0 You\u2019re welcome. Thanks, Kevin. Bye.<\/p>\n","protected":false},"excerpt":{"rendered":" We feature a chat with Jo Chivers from Property Bloom about how she has developed her own portfolio and imparts that knowledge to her clients. Like all successful people, Jo freely shares her experiences with us. Transcript: Kevin:\u00a0 There is a very big…<\/p>\n","protected":false},"author":176692473,"featured_media":9358,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[33,10,11,13,36,17,25],"tags":[101],"class_list":["post-25306","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-case-studies-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-property-investment","category-sponsored-channels","tag-podcast"],"yoast_head":"\nTranscript:<\/strong><\/h4>\n