How to get on BRW rich 200 via residential property?

[see_change]

How do you explain why so many developers go broke

Probably the same reason why most business go broke , or close down. ( and developing is a business )

They don't know what they're doing.

Most " Jobs " have training associated with them . Most people do not go though training to set up a " business ". So while most people can do their job ok, when they try and set up a business , things tend not to do as well.

Even success in one type of business doesn't mean they will succeed in others. I have one friend who has successfully set up , run and managed three businesses ( same type ) very successfully , but his efforts to make this work in other areas have financially expensive and emotionally draining for him and his family to date.

See Change

 

[Sailesh Channan]

Starting off in real estate is one of the biggest step an investor makes. This step is also the riskiest as he/she stands to loose all thier seed capital should things fail. This is because when you start out in property you out lay more money than the property is worth. This goes to cover costs such as stamp duty, mortage set up costs, solicitors costs,etc.

The only way you can make money here is if the property goes up in value. In a flat market it could take several years to recover the extra funds just to break even. However, most investors who have a 10 year or longer investment window will see good gains.

Property developers however, factor all costs into a feasibility assessment and only develop properties that show reasonable returns.

I believe that property development alone may be like putting all your eggs in one basket. Therefore, you will need a diversified investment portfolio consisting of shares, commercial properties and businesses. It hs also been mentioned before that land banking can create phenomenal wealth...if you judge tha market correctly.

So it is a matter of learning to crawl before you can walk and then run. In property you start by purchaseing property the normal way then enter small developments then onto bigger developments.

Most of the horror stories of property development would relate to larger developments as the risks multiply and are also amplified.
Typical risks are
Development risk:
In correct feasibility assment
Council places unforseen conditions
Council decision takes longer than expected
Reduction in th number of dwellings
Development cost blowouts
Construction cost blowout

Market Risk:
Price downturn
Market saturated with similar dwellings
Takes longer to sell

I believe when it comes to large developments timing is everything.

In the current market 2 to 4 unit/house developments are working well and this is where my focus lies until the next upturn.

 

[JoannaK]

How do you explain why so many developers go broke

Alot of developers make the mistake of getting cocky. They have one or two successful projects and think they're gods gift to the market, then run around like headless chooks optioning up and buying all sorts of sites without doing proper DD. Then they divert funds from their existing project to fund holding and design costs on these other sites they've just acquired. Then in desperation they seek out investors and expensive mezz funding (not criticising mezz funding - it can be very beneficial to a prudent developer).

Ultimately they end up in a big red hole chasing their tails.

Well considered, costed, sensible, and well paced developements and developers should always make a profit. No developer can afford to get ahead of themselves. Even in market downturns, with the right financial structures and good planning with a bit of foresight a developer should always be ahead.

As for getting on the Rich 200 list via residential - i don't think it can be done by buy and hold. If residential is the only market a person will invest in then he won't make the Rich 200 unless he develops and holds at least a portion of his end product.

Besides, being on the Rich 200 opens up a whole other can of worms...I'd rather be anonymous and fly under the radar.

 

[aef]

Good point JoannaK,

I'd like to be rich enough to be on the list without actually being on the list.

It is possible.

Regards
A

 

[markp]

A bit like sexuality and religion?

I agree with your erxplanation about developers. I think it has a lot to do with their make up.

Cheers

 

[WashingtonBrown]

Hi Joanna - Hope u r well.

I agree with your comments above!!

Then, because they have bought badly - they try and screw the valuer and QS in order to make a sick project work!!

Worked in a rising market.......eek now.

Regards

 

[Sailesh Channan]

You need patience while choosing sites for development. Sometimes you have to look at other development options because the type of development you where initially looking to undertake may not be viable and it may take years for the market to recover for that type of project to become viable again.

For example, if there are a glut of units on the market then providing more of the same would be disasterous.

The key is to have a good look at what products are selling well and why. You then develop accordingly. However, you need to be vigilent as market conditions change constantly.

One of the key charastics of a good developer is having vision and picking trends early.

 

[young_gun]

As state by Peter Spann a few months ago , their are alot of people who dont want to be on the rich 200 list and attract attention to themselves. I think you will find that their are alot more richer people (maybe not alot more people , but their would be a fair few people ) that keep a low profile. Often people on the BRW 200 list have buisness that are well known or are founders of buisnesses that have been sold therfore are well known in the media.

 

[muney]

just bought my copy of BRW just to see what the fuss was about..very interesting read for those of you who havent got a copy..i would say that more than 90% of participants have got to where they are through property..such as development etc..one thing i would like to know is..how does one purchase a shopping centre..seems like a few of these people have a few under their wing..so i went driving around the burbs today and strike me pink..could not find a for sale sign on any of my local shopping centres!

 

[pete_w]

from what i've seen they dont really put for sale signs on them, but if you look for commercial properties online you'll see plenty. the pizza shop building down the road from me is for sale, but you'd never know from looking at the shop

 

[D.T.]

and strike me pink..could not find a for sale sign on any of my local shopping centres!

Maybe Westfield is being greedy?

 

[pooomba]

Hi round12. I'm interested in why you want to be on the list?
I've done well out of property and my wife and I never have to work again and we have 7 million dollars worth of property. We don't need anymore to live the life of our dreams. So why the goal of 150 million??

 

[alexlee]

round12tko has been banned, I believe.

Oh well. As long as it stimulates debate from all members, I guess the original motives don't matter.
Alex

 

[pooomba]

Oh OK then. Well why would any one want to get on to a rich list? Money can't be the motivation??

 

[alexlee]

Oh OK then. Well why would any one want to get on to a rich list? Money can't be the motivation??

I think for two reasons. Fame (a la Donald Trump) and because they do something public (shareholdings in listed companies, buy/sell a major business or property development, etc).

I think there are plenty of private investors, etc who are richer than the people on the BRW200 but aren't on it because they don't want to be.

The editors of the Forbes rich list admitted that they have to estimate a lot of their listee's wealth, especially when it comes to private companies, private landholdings, etc. They ask the owners for estimates, so people who want to show how rich they are (again, using Trump as an example) they will respond with big figures.
Alex

 

[Go Fast]

The editors of the Forbes rich list admitted that they have to estimate a lot of their listee's wealth, especially when it comes to private companies, private landholdings, etc. They ask the owners for estimates, so people who want to show how rich they are (again, using Trump as an example) they will respond with big figures.
Alex

That's right! A couple of years ago one of the 'Top 200' wealth went up $100m+ from one year. The reason was 'unknown' shareholdings. He was a director of the company & all that information was publically available. I also know for a fact that he's worth plenty more than the reported figure last year.

I think privacy & the tax-man are probably the main reasons people don't want to be on the list. I know of a couple that also qualify but I don't see their names on it.

 

[crest133]

I couldn't seem to get a discount anywhere until they took me off the list, it's much better now.

 

[Mary]

I think there are plenty of private investors, etc who are richer than the people on the BRW200 but aren't on it because they don't want to be.Alex

YOU DO NOT HAVE A CHOICE TO BE ON THE BRW 200. IF YOU HAVE $130M + OF ASSETS, YOU ARE ON THE LIST. PERIOD.

 

[vla]

To get on it would be an achievement even for one year. I know a millionaire with no debts, house in toorak, a million dollar business, a few IPs, drives Merc, landrover, flies first class etc but is still not on the list.

 

[Aceyducey]

Mary,

Don't put blind faith in lists. Many people don't want others to know how wealthy they are and there are many ways to conceal wealth through various vehicles in order to protect anonymity.

Who are the richest people in the world? Warren Buffet isn't at the top of the list

The fastest way to get on the BRW Top 200 list is with some whiteout and a black pen.

Then once your ego is satisfied you can get down to investing in order to build your own lifestyle.

Cheers,

Aceyducey