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Mastering Property Developing and how to make 25% profit deal after deal.
In this report we go through the process of property developing. We’ll start with a single house and move up to more complex developments and the things you need to understand in order to profitably complete bigger deals. First of all I need to say to you that what you will find in this report is enough to point you in the right direction BUT will not be enough to give you everything you need to know to complete a deal. Please understand that you need the right people around you with the right expertise to develop property successfully and you will need to know more before you start a projects that we could possibly include in this report.
There are 3 main things you will need to understand to become a developer. 1 - You must understand the process of developing and building (or at least know who to ask) 2 - You must understand the finance associated with development which is often very different to the finance you would use to build your house. 3 - You must understand sales and you must begin with the sales process before you begin the project (more on this later). When you become a developer you are basically the organiser of many different experts and consultants. You need to know who to talk to , at what point in the process and what you need them to do. While there are some property investment strategies which allow you to be passive in the process, property developing needs you to be on board with your finger on the pulse, keeping everything on track.
So what is development and what kind of projects are we talking about? We have two main categories or areas we can play in:
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In residential construction we are talking about: • Single dwelling • Dual occupancy • Duplex • Unit Blocks • High Rise In Commercial Construction we are talking about: • Offices • Retail • Industrial • Special Purpose • Storage • Garages • Medical • Childcare • Motels etc So let’s start at the beginning with a single dwelling. The first thing you need to consider is what your costs are going to be and site selection. Right from the word go you will need to consider the area and the market you will be selling your product into when the project is complete. You will need to know whether you will be able to turn a profit when it comes time to sell given the cost of the land and the cost of the build. Cost of the build can vary widely based on design, builder, fittings and materials used, and the site costs (for instance it costs more to build on a slope than a flat block, different soils can change the cost of the build - there are many factors which can change thefts of the build when it comes to site costs) You’ll also need to do due diligence on the area and the market at the time. Sometimes a build can take 12 or 18 months and the market can change in that time so it pays to know whether there is enough money in the deal to absorb these kind of changes. So how do you work all of these details out before you start your project? 4
You need to go and start talking to town planers, engineers who know the area and soil types etc. You need to talk to project home builders and even custom builders who have built in the area before. Project builders are often a huge source of information when it comes to working out design and knowing more or less what your square meterage costs are going to be. Once you have your cost of build, site costs and the cost of the land worked out you will know whether, given the state of the market, you will be able to sell the final product for a good profit. The other thing you need to consider is why, when you get two houses which are very similar and on similar size blocks and in a similar area can sometimes sell for very different prices. If you are going to talk to project builders it’s worth looking at new developments that they have done. Find out which designs sold better than others and which designs sold for more than others. Go into each of the designs and see if you can work out what the difference is between the options and why one sold for more than the other. Usually when all other things are equal the one factor that separates higher sales prices from lower ones is design. If you can work out the design factors which create more impact then you can incorporate those factors into your project. One of the places you can go to get a sense of costing for your build is www.Archicentre.com.au they have very extensive costings for all types of construction all over Australia. Land Value The next thing to factor in to this potential deal is land value. All things being equal it will not cost you much more to build a 4 bedroom, 2 bathroom family house in rural Queensland than it will for you to build the same house in central Sydney. Choosing to do a development in a flat market with little growth over time will mean that the amount of money you could potentially make from your project is going to less. 5
You are going to build on a piece of land which is going to increase the value of the land but if you can also take advantage of growth in the land value at the same time then you are dramatically increasing your chances of making much more profit as the land value increases while you are actually doing the build. Other things to consider. Some developers will develop a single dwelling to sell others to keep and rent out for the passive income. If you re looking to keep and rent what you build might also change. The cost to build a single family dwelling is already something you have looked at and if you are going to rent it you will find that there is a market level for rent’s in the area. However to add a one bedroom self contained flat attached to your build, or an attached granny flat or any kind of dual occupancy option really only comes down to design. You may be able to build a dual-oc on the same land for not much more than the cost of your original build but now you will have two rentable doors. There may a small drop in rental prices for the one house because you will have two slightly smaller dwellings but the end result of collecting rents from two dwellings will be much higher overall. The caveat to this is that not all councils will allow you to do this. You must find out if you are allowed to do this before you make these changes to design. Many councils are starting to change these rules now around the country so you could do this to plan for the future but at this stage if you do not have permission then do not operate as a dual-oc scenario. Doing so will not only get you into trouble with the council but also may invalidate your insurance. If your council does allow this then make sure you have the proper permissions and take those to your insurance company so they know what you are doing. If you want to look at some of the numbers required to make this work come along to one of my One day events which will explain a lot more about investing wisely and making your investment positively geared 6
Now Lets have a look at the build process for a project. Which comes first land our the house? This is a question that many students ask me. I think we need to go back even further and look at the market you are going into. Some areas are in higher demand or demand is increasing, other areas demand is much less and so growth in that area is much slower. This is the first place you need to start. Due your due diligence on an area and work out where the market is and where it is likely to be going. Once you have chosen an area then you can start considering the kind of land which is selling. What size blocks are selling most or fastest? What kind of development are you going to put on it? Will you be putting a single dwelling or a dual-oc or a 4-plex or more on it and choose the size of land which is appropriate. Do all this due diligence while looking ahead and asking “what sells?”, “where can I get the highest value in this deal?” Researching builders. It doesn’t matter whether you use a big project builder or you use a custom builder as long as you can do one of two things: 1-if you are using a project builder that you are getting enough differentiation between your place and the one 3 doors down the street built by the same people. 2- if you are using a custom builder that you are getting your cost efficiencies down low enough to match the cost of building with a project builder. Much of this will come down to design and materials used. If you can get one of those options to work then start to take the time to look at the builders registration, their insurances, look online for reviews of those businesses from previous clients (and look on independent review sites not the businesses own website). Check on state building associations for professional feedback and whether they have had any complaints lodged against them. Talk to contractors and find out if they are getting paid on time (or at all). Ask the contractors how they feel about working with that builder. 7
Find out about the contractors, if they own any properties etc… the more information you can find about the company and who works for them the better. This will give you a nice clear picture of how they operate and whether you want to hire them for your job. Once you have selected a builder then you need to create or select a design. If you are going with an architect designed home and custom builder do a final check on their quotes. If you are going with a project builder then select your preferred design and make any changes to the plans that you want to do. Negotiate any and changes that you see fit to make to the plans. Remember that this can change the cost of the build. Even adding additional power points can (with some builders) add significant costs to the project so make sure you check all of this out when you make changes. Don’t rearrange the electrical and plumbing if you can help it - you would be better off looking at another company or design that has things where you want it. Any changes you want to make to create differentiation to the house you will want to ask the question “if I made this change would the house sell for more?” “…Would it rent for more?” You can see that adding additional power points may not get a yet to that question, but other features may get a yes to that question. Select your finishes. Most builders will have finishes that they are used to working with or have a couple of options. Generally it’s best to stick with the standard but keep in mind that you also need to match your finishes to the area you are building in. If you are building in a cheap area where cheap finishes are standard then putting Italian marble would be a waste of money and vice versa if the standard in the area is higher then you will need to match that standard in the area to have your house sell for the price you want. You need to clarify with the building company who is responsible for all materials and who is responsible for costs of delays and over-runs.
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If you are still happy with all of this then you now need to get the builder to visit the site for a site inspection at which time they will complete the following: • Soil testing • Contour survey • Site inspection by a qualified building supervisor • Preparation of contract documents • Preparation of full working drawings …So that they can come up with an accurate quote for your exact site. They will also submit plans to council so that council can approve and check off that al requirements have been met. Once they have done this they can come up with a draft contract. You need to send the final contract to your legal people and have them explain it to you or you need to read the contract so that you understand every single sentence fully so you know exactly what you re going to get and what is expected of you. At this stage you will need to take your draft contract to your lender to get finance approval. Your lender will give your builder authority to commence construction (which the builder will want to see) Once this is all done you and the builder will both sign the contract and typically you will pay the builder 5% deposit to begin the build which usually comes off your final payment. HOT TIP: If you happen to be doing this remotely and are not able to visit the site or you feel you are not knowledgeable enough to check if the builders are doing the quality of work promised then you can hire a ‘handover inspector’ who is typically an experienced builder who know exactly what each stage of the building process should involve and be up to. This way when you have progress payments due during the build process you can have the inspector check and make sure that stage is all complete and up to standard before you hand over the progress payment. Equally so when it comes time for a final payment you can get a final inspection from an independent building inspector to create a defect list. Hand the defect list to the builder and give them 14 days to correct all of those defects before you hand over any money. 9
Requirements prior to first drawdown You are going to need: • a copy of stamped council approved plans and specifications • Copy of builders all risk insurance (either on insurers letterhead or certificate of currency) • Copy of owners Warranty certificate • Executed fixed price building contract • An authority from you to pay the builder Requirement Prior to the final process payment You will need:
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An occupancy permit, acceptable to the lender in respect to building works and any other permission that is required by ay relevant authority in relation to the occupation of the land (not applicable in SA or WA) A building Insurance policy or certificate of currency for an amount not less that the value of the completed building
Building more than a single dwelling. The more dwellings you build (ie duplex, 4-plex, 12Plex, apartment building etc) the more complex this process becomes.
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Complexity increases • Finance • Application process • Council requirements • Consultants • Report Everything gets more complex… …and project builders at a certain point are no longer an option. You will have to work with architects and custom or specialist builders to complete your projects. Mistakes at this level will be magnified because the cost of mistakes will also be magnified, conversely if you get it right your profits will also be magnified. It’s worth learning the ropes with single or dual-occupancy type projects before you move to this stage. 10
Heres a quick synopsis of the next couple of stages: Duplex construction: • Same process as single dwelling just two not one • Can still use regular builders • Finance still residential • Usually no presages needed 3 and 4 Unit Developments • Same process just multiples • Finance can still be residential but can be harder to get. • Usually will need pre-sales - particularly for a weak applicant. Stronger applicants may not need pre-sales 6 and Above Unit Developments • Commercial lending • 30% - 40% of your own money invested in the deal • Pre-sales required - although if applicant is strong and rentals are strong this may be overlooked. • Extensive needs analysis is required • While construction process is similar the number of consultant is greater • Cost savings magnify profits. • Mistakes magnify losses. Once you get to this level there are things that you must know and rules that you must follow in order to maximise your profits and minimise any mistakes. I have created a blueprint which consistently creates 25% of manufactured growth time and time again. The great this about working with this blueprint is that you no longer need to wait for the property cycle to be moving in your favour you can go and create your own property boom every year for the rest of your life. I have students at various stages of this process and doing some very successful projects and you can do the same if you learn the process and work with my blueprint.
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In the meantime I hope this report was useful to you and helps at least points you in the right direction with starting your own property developing empire.
To get more free training from Dymphna check out her online webinar CLICK HERE Or check when her free one day seminars are coming to a town near you CLICK HERE
Who is Dymphna Boholt From a farm in Central Queensland to downtown Bangkok, to Canberra University and a career as an accountant and economist; to being one of Australia’s most successful property investors, and leading real estate strategist and educator specialising in tax, asset protection and international investment, it’s no wonder Dymphna Boholt is known by many professional and personal contacts as Dymphna the Dynamo! Born in a small central Queensland town, Dymphna began her working life as a jillaroo. Her first investment was a cow at the age of 4, which she used to 12
breed with other cattle in the area to create her first asset portfolio – a herd. Dymphna sold her herd to pay for her university degree in Accounting and Economics, and graduated from the Australian National University in Canberra. Upon graduation, she had fifteen job offers and chose to move to Sydney and work with the prestigious Coopers & Lybrand (One of the eight biggest accountancy firms worldwide). She also did stints as a financial controller in the liquor, mining, and the stock-broking and finance industries. In 1994, she found herself ‘starting over’ after a divorce left her with very little money, pregnant and a toddler to support on her own. To get back on her feet, she moved to the Sunshine Coast and started her own accountancy practice, Active Financial Answers, which she has since sold. In the year 2000, Dymphna met U.S. property guru and real estate adviser to Robert Kiyosaki, Dr Dolf de Roos. Listening to him on stage, Dymphna realised she was doing exactly what he was warning against – ‘trading time for money’. Keen to move away from the constraints of being a solo mum who was working full time, she decided to try her hand at real estate investment. She focused on properties that brought in more than they cost her. Within just one year she had accumulated a $3.5 million property portfolio, boasting $1.55 million in equity and totally replacing the income she was earning as an accountant working 40 to 60 hours per week. Through just one property purchase, she managed to generate a passive income greater than the average Australian wage. Since that time, she has become firm friends with Dr de Roos. Her property portfolio has expanded considerably to become a multi-million dollar international property portfolio. This led her to be featured in a book in 2005, alongside the most successful property investors in the country titled Secrets of Property Millionaires Exposed. More recently, Dymphna has released her self-published book titled Protect Your Ass—ets! It is the first of a series of books she will be releasing and is about the incredibly important topic of asset protection and the need for it in Australia’s increasingly litigious society. She is a director and major share holder of Alagrow Pty Ltd, a mining company based on the Sunshine Coast with exploration and mining licenses on one of the largest and most pure zeolite ore bodies located in Australia, and potentially the world. The tested, proven reserves are in excess of 3,500,000 tonne with estimated reserves as high as 17,500,000 tonne. With an average profit margin on mining and selling zeolite at approximately $100 13
per tonne the potential profitability of the mine is in excess of one billion dollars. Alagrow Pty Ltd is currently conducting extensive research and development in the area of toxic and radioactive waste clean-up and prevention. The zeolite from the Alagrow ore body has recently been tested in Bulgaria for application as an environmental barrier and has been found to be the only known naturally forming ore body capable of this application. Dymphna is also the co-founder and co-director of a highly successful national mentoring program based on the Sunshine Coast called WildlyWealthyWomen.com. Dymphna also organises events of her own and sells educational products around the world ranging from free and low cost articles, reports and audios through to comprehensive home-study packages on a range of topics. She works closely with an experienced group of credit strategists called Investor Loans Network who can source finance, and more importantly, will assist investors through ongoing education and support in line with Dymphna’s real estate teachings. The main objective of Investor Loans Network is to work alongside clients to achieve their financial and wealth goals. Investor Loans Network are a national team, with strategists working in all states and territories of Australia with their clients. Dymphna is also in great demand nationally and internationally as a speaker on a multitude of topics most of which fall under personal finance, business, taxation, asset protection, property investing or motivation/inspiration. She is regularly called on by the media for interviews or to contribute articles – see her website for her extensive list of media coverage. The now happily remarried mother of three lives on the beautiful Sunshine Coast on her 32 acre piece of paradise, completely surrounded by rain forest, birds, creeks and other wild life.
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