good thread but for reasons other that whats discussed
Peter,
I must confess that I treat most persons involved in the seminar circuit with contempt however this has more to do with recent times (HK etc) and the fact I feel that most people "know" what needs to be done they just dont do it much like diet books, heres a surpise eat less and excerice but people dont.
However this post is not a swipe but just an honest opinion, for example it would be more fruitfull to attend a dry cut course on investing that a seminar however if persons seak inspiration they wont get it from such a course and this is where i beleive you come in.
Again please dont read this as a swipe but it was needed to highlight my curiousity to the line of questioning in past posts. EVERYONE seems to be hung up on the shocking surprise that buying land, developing is profitable? WE ALL KNEW THIS but for some reason when we are told we act shocked and surprised and in awe?
Price will double in 10 years? Amount per block? the block next to me is cheaper? blah blah blah who cares? as an investment forum we should be at the stage that we know there is difference on opinion and not get hung up on particulars and be more interested in process and make a decision on whether this particular process, approach is correct, Peter would have probably been better off using a hypothetical so people could read the post for its intention a view on a particular strategy not a feasibility assesment on a project.
But incase for those who were genuinly in shock that investing in land makes money--
Buying a house is least risky and hence the smallest return, building is next with slightly more risky and slightly better return, then it developing in already appropriately zoned land, riskier and hence higher return, then its going for a re-zone in an "appropriately" located area again higher risk and higher return then the ultimate, buy land which is worthless today (figuratively speaking), the wrong zoning and hoping one day for the planets to aline, and subdivide, highest risk and hence the highest return.
Now that we have covered the incredible difficult principals of property investing why is it so hard? MONEY!!!!!!! give me 100 million and i will gaurantee i can turn it into ATLEAST 30% higher within 2 years providing a return of 30 million not bad, but turn that into 100k and get 30k its not so exciting.
So here is where i beleive this post is most interesting. As a developer i am very interested in particular;
1. How did you get your AFS, all ventures I have entered into have been mutually agreed to i.e. fellow developers and not advertised hence not requiring any managed investment requirements etc. Is the appropriate AFS requirements a large undertaking, I have not investigated past beyond the point that I will require it in the future as its not appropriate for me at this point in time. (i have also asumed in the future I could associate with a financial advisory firm with such a licence and avoid the process).
I fully understand that compared to your company employing 40 as opposed to my own 5 is like comparing apples with oranges but the principal should be the same.
All said I am impressed with your acheivements but like the post title not for finding a good sized block this is easy (you know what i mean) but rather setting up structures in place to raise the capital and the stragedy to continue expanding.
My other question is (strategy side);
How do you decide the mix of long term and short term developments. For instance it can be argued that if I develop non-stop for 10 years in short term developments (2yr under) with a return of 20% per project that I could match a land dev deal that spans 10 years the benefit being not all my egs are in the one basket but the downfall is the time\dedication required for doing 100 projects.
My current mix has a level of arbitrary decision making i.e. x% for current, y% for longer term projects.
Ideally we would all like to find projects were we JV with the land owner on an option fee for 5 years and simply DA approve in the mean time but this is rare given most people selling such parcels are 70+ years old, selling the farm and want to blow it on the high life at the lawn bowls last thing they want is a pesky developer trying to sell them the promise land of a 5-10 year deal.
I enjoy your response regarding how much you are prepared to spend i.e. whatever it takes to make the deal still worthwhile (i agree) but how do you FIRST decide the investment mix.
e.g. I have been involved in a 900 lot sub division (4m purchase on a 400k option) which i got DA approved for stage 1, 50 lots, average sell price $170k, 50k services, with retail section and other tad bits.
This is ideal, but they dont come along oftern and I get crushed by the big banks like macquarie which I am sure you have faced i.e. you walk in with a great deal and they say WE AGREE, well buy it..umm no thanks so then they introduce you to the box... the one you will live in until you sell the development
Anyways what I am trying to say is do you have an investment strategy relating to IRR and then get ANYTHING you find that fits? this is hard because if i want to find another land deal i need to hit the pavement a long and time consuming ordeal compared to simply developing on ready zoned land which involves calling agents and hitting the sites.
Therefore there MUST be a mix but whats its basis? case by case? or am i reading to much into it and attempting to mechanise the whole process to the last detail?
Anyways sorry for my long winded post and apologise if you take offence to any of my statements, writing and speaking are different and I am no english master so again sorry if i have come across insulting.
Enjoy your day.