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The 2016 BRW Rich List and Young Rich List should serve as inspiration to all property investors across Australia.
More than a quarter of this year’s top 200 list was made of individuals whose wealth was accumulated through property. #1 on the list was Meriton Group owner Harry Triguboff with a reported personal wealth of $10.62bn, nearly $3bn ahead of second place.
The technology industry dominated this year’s Young Rich List, but still there were two property developers (Paul Blackburne from Blackburne Property Group and Tim Gurner from GurnerTM) who made the top 10.
Property development has the potential to be far more profitable than any passive real estate investment. But it’s also higher risk, and involves a lot more skill and effort as well.
Typically investors start with a few passive investments to familiarise themselves with the investment process. This gives them the experience of researching markets, conducting due diligence, negotiating purchases, undertaking minor improvements/renovations, and then tenanting or selling their end properties.
Property development is the obvious next step. This certainly has been the case with all the expert investors I’ve met with and interviewed on the Long Property Show.
It doesn’t have to be hundreds of apartments in a high-density complex. A small development may simply involve the construction of a new house, or a few new townhouses. The process for all developments is actually quite similar, and so too are the relative returns. A large apartment complex or new housing estate would generally be for large/listed developers, whereas a simple land subdivision and new build is really accessible to anyone, so long as you have the right team around you…
In today’s episode of The Long Property Show I had the great pleasure of speaking with Jo Chivers, founder and managing director of property development and management company, Property Bloom.
Jo’s quite the inspiration. She’s a suburban girl turned corporate high flyer, and now a leading property developer, commentator, author and business owner in Australia.
She has been in business for 15+ years and during that time she has developed over 100 properties for herself and on behalf of her clients. She’s also the mother of two children and a great example of balancing career and family very successfully.
When Jo was pregnant with her first child she realised her and her husband had no investments or financial plans to get ahead. So she started educating herself and then found herself buying off-the-plan properties in Sydney about 12 months later. This was way back when developers sold off the plan stock at discounted prices to attract buyers.
Jo’s second light bulb moment was when she saw the money she was making with her off-the-plan investments and realised the profit potential that was available if she herself become the developer. Shortly afterwards she completed her first development in the Hunter region of NSW, and from that moment on… she was hooked.
When Jo’s friends began asking her to assist them with similar development projects of their own, Jo realised there was a real need for property development and project management services. Property Bloom was born.
Since 2001 Property Bloom has assisted hundreds of clients with the full end-to-end development process. They research the market, locate the development site, conduct feasibility analysis, and then purchase the sites on behalf of their clients.
They then coordinate the design and planning processes, secure the development approval through council, tender the construction work and then project manage the full builds. They provide weekly updates/reporting to clients and then they even bring local agents in at the end of the process to assist with either leasing or selling the developed properties.
A typical project either involves building 2-4 townhouses on land in a new estate, or buying a larger piece of land with an existing house on it, renovating the house and then building a duplex behind it. Each project typically delivers approx. $180k equity within 12 months in today’s market.
Here are the key topics we cover in today’s chat:
- What to watch out for when buying development sites and why the land you buy is so critical
- How to know your market, avoid over capitalising, and save money with smart building designs
- Key due diligence items and the financial metrics most important for developers
- The danger of buying sites with existing development approvals, what can go wrong and strategies for mitigating risk
- Builder due diligence, the implications of your builder going into liquidation and strategies to de-risk the construction phase
- Finance structures for developers, what the banks will and won’t fund and what kind of cash is required to undertake projects
- Using council websites to learn where growth areas are likely to be; and
- Update on the Hunter market plus noticeable trends over the past 12 months
Jo’s tip for property investors/developers:
Get educated but also start ‘doing’. You can pay a lot of money for courses but at the end of the day you’ve got to put it all into action. The best learning comes from actually going through the process.
Ladies and gentlemen, without further ado, please enjoy today’s LPS interview, with Jo Chivers:
If you like this interview hopefully we can get Jo back on the show for a Part II. I think it would be great presenting a Property Bloom case study and really going through one of Jo’s developments in further detail.
You can visit www.propertybloom.com.au to find out more about Jo’s company.
Her three books Property is a Girl’s Best Friend, Property Millionaire and Ms Millionaire are all available here.
