20% pa, Minimum

[beech]

Just wondering how everyone goes about setting targets for themselves.

I figure setting goals for myself to be very important as it will push me to remain on course for a particular outcome.
I have personally done well over the past 3 years but with a bit more purpose i could have done ALOT more investing in that time and reaped the rewards.

Im a bricklayer by trade and doing the Builders registration course at the moment which im enjoying, out at Chadstone.
I intend to be involved in Property development in the future and its obviously a big bonus to be building them myself to keep.

I expect where i intend to build units etc to be a solid area for investment and the units i build to be pretty much cashflow neutral or there abouts.(may sell the odd 1 to balance portfolio if need be)

Now as the title suggests i expect to grow my net wealth by 20%pa over the next 5 years at least.

I have 1 development ready to go and after excellent growth while waiting for DA, 20% this year will not be a problem.

Currently looking at another site for purchase to be developed next year considering DA takes 9-15 months.
Im aiming to have only 1 development per year at this early stage,though depending on size may do 2 if ready to go another.

In regards to costs and controlling them im very confident of 25% profit on development.
Aside from building them, doing the brickwork saves me about 5-6k that i dont need to pay to anyone so i look at that money being a buffer for unexpected expenses.

So my question is-does anyone set goals in % terms like i intend to do?
-how do others go about setting goals?
-does anyone think my goals are unrealistic?

PS-i always enjoy other peoples posts re their particular developments so i thought it was time i did.

 

[Kristine..]

Hi Beech

If we don't set goals we don't achieve much. You have obviously worked it all out and therefore have a high likelihood of achieving your goals.

However, what you are proposing to do is business, not strictly property investment. Yes, you will be doing property development, but doing this as a business - is that right?

For a developer to work to a margin of 20% would really be the bare minimum. Anything less than that budgetry expectation and you will be sailing very close to the wind.

How does your Turner's Hypothetical compute? This is still the best calculation to perform, particularly with your first development. What contingency are you allowing?

You will learn in the Project Management module that if everything is planned and managed well you can save significant costs and not just in interest. Neil and Tim and John will take you through the various scenarios such as 'is it better to have one bricklayer for two days or two bricklayers for one day' and all the overlapping which must be managed well.

But the bottom line is the most important part of any project. If you are lucky enough to have any fellow students who have actually done any commercial developments then pick their brains! When I did the course I was doing a dual occ, one other participant was doing a land sub-division at Sunbury and one who was building a spec house by himself. No one else had run their own projects (read: had their own money invested) although there were plenty of carpenters, one architect, one commercial project manager, three accountants, one tender manager, and some builders of significant experience but who had not done any of their own projects.

Good luck and a Gold Star for your ambitions. Please give my warmest regards to the Tutors.

Cheers

Kristine

 

[paulie]

Hi Beech,

Whilst not having a personal goal for my net wealth growth targets (I figure why cap it at 20% - only kidding) I am familar with development costing and the typical profit margins required.

In it's simplest form work backwards from what price you expect to sell th efinished product for IN TODAYS MARKET (Prices may or may not rise over the life of a development, if they do - great more profit, if they don't still some profit - fingers crossed).

EXAMPLE:
Finished product 5 units - current market value $300,000 each = $1,500,000
Less profit of 20% ~ $300,000
~ $1,200,000
Less GST on sale of units 5 X $30,000 each ~ $150,000
~ $1,050,000
Less Selling fees of 5 X $10,000 ~ $50,000
~ $1,000,000
Less Holding costs on money borrowed to buy site and build ($1,000,000 @ 10% over 9 months) ~ $75,000
~ $925,000
Less Building costs est at $100,000 X 5 units ~ $500,000
~ $425,000
Less Site preparation costs & professional fees like surveyors, draftsmen etc ~ $100,000
~ $325,000
Less 4% stamp duty and associated buying costs ~ $13,000
~ $312,000

$312,000 is then the magic number for what you can buy the block for to begin with to make 20% profit on the deal ~ being $300,000. Obviously being able to remove costs in full (by being able to sell the properties yourself) or reduce parts of the costs (being a brickie) involved in the process allows either more profit or it allows you to pay a higher price when you acquire the property.

I hope this has been of value.

Cheers


Paulie

 

[beech]

hi Kristine,

i do remember you doing the course some time ago and was one of the reasons i got some info on the course.

the 20% minimum was the amount i plan to add to my net worth on a yearly basis.

25% minimum i expect to profit on my developments.

And you are right,definitely a business.

Turner's Hypothetical,havnt come across this as yet.

And there certainly is an interesting cross-section of people doing the course.

I will say hello for you,im sure they will remember you as you were probably firing questions at them right left and centre.

 

[JoannaK]

Hi Beech,

Personally, if I can't double my money (the amount I actually have to put in to it) on a development I won't do it....and we aim for a margin of between 25 and 30%.

 

[Jacque]

Beech,
I read an interesting part in Jack Collis' book WORK SMARTER NOT HARDER recently about goal setting.
A US study was carried out on the productivity of 30 high achievers. All were highly successful multi millionaires and first class achievers. Only 6, however, admitted to writing down their goals. The researchers then asked them what they had achieved, and discovered that the 24 who hadn't written down their plans/goals had only achieved 40% of the group's total achievement. The 6 who had written had achieved a massive 60% of the group's total achievement.
This result, according to Collis, is proof enough that writing down goals is more effective than trying to keep track of them in your head.

Food for thought, methinks! In the past, I've never really been one for serious written goal planning, but I'm now doing the suggested exercises in his book and its making me feel more confident and time productive already!

Our goals are not static of course. Over time and situations, they need altering and refining. Some may even get ditched in favour of better ones, as we discover our passions and dump our time wasters. That's life.

 

[beech]

hi Joannak

the 20% minimum i mention is the minimum i expect to add to my net worth on a yearly basis.(eg 800k year 1,960k net worth year 2 etc.)
As for the developments definitely minimum profit of 25%-30% and upwards on development.

hi Jacque,

ive read a bit about setting goals recently and now believe they will benefit me greatly.
I hadnt bothered in the past but now being involved in development,they will be implemented.

I agree our goals will change with time as circumstances change.So i will just have to set some new goals.

thanks for your post.