New to forum about me & Qs?

Hi All

I'm new to the forum, a great read so far. Gotta love the internet, there's a forum for everything.

My names Dan and I live in Melbourne. I'm self-employed as a registered domestic builder. I turn over a few order homes per year (mostly the middle custom end of the market) where my role is mostly project managing with abit of hands on. I have also built my own investment projects in the past and plan to keep doing so.

Most of my investment advice has come from my Dad which has been good thus far as it was a good kick start but I'm starting to think "am I missing out on something". Most of my investments have been in my local area in outer Nth/West Melbourne where I guess growth rates aren't too high.

I bought and built my first place when I was 21 and since then had a few blocks and houses come and go setting me up in my current situation. My PPOR is paid off which has a market value of about $550k-$600k and I have a 2 unit (1 townhouse, 1 unit) IP which has neutral cash flow. Both properties I built. Some months ago I laid a deposit down (this time joint shared with my girlfriend) on a block again in my local area. Currently getting plans drawn and the build will commence shortly. We have taken a loan out for the land portion only but I will be using my line of credit to do the build. At the end of the build I plan to re-value & re-finance the project and take out a separate loan.

I estimate that the new project being a 3 bed + study will produce a positive cash flow of somewhere around $500-$1500 per annum at worst case scenario.
If I was to sell it off I'd pick up around $70k-$90k. Do I keep or do I sell is something I'll have to decide later. I did make a decision some time ago that if an IP did at least have neutral cash flow that I'd keep it.

I believe I am in a good position to start making some good investments somewhere. There is 2 incomes involved now aswell as I have access to working capital.

The question that I often encounter within myself is do I stick to what I know in my local area? or should I start to venture out? I'm stuck on the idea that I need to build in order to make money.

Any thoughts & ideas on this appreciated.
 
Let me guess... you enjoy fishing too? :D

The question that I often encounter within myself is do I stick to what I know in my local area? or should I start to venture out? I'm stuck on the idea that I need to build in order to make money.

Any thoughts & ideas on this appreciated.

Sometimes it pays to stick to what you know and make the most of it if every man and his dog don't try to do the same thing. It helps if you have a niche that the masses can't replicate.

Otherwise go to where the figures stack up - simple as that. Investing is a business.
 
I agree with Kinnon Bell

Stick to what you know and what you are good at.
You can make more money on things you find boring than on things you find exciting - because it's new.

There is a lag time in anything new and the excitement in that will wear off too. Focus on profit not excitement.

I like to keep my business boring and mundane - because I know it so well and keep my LIFE interesting.
 
Dan,

it looks like you are in a very good position as you have paid off PPOR.

what i believe is if you have a well tested system and process in place then you have reduced your risks significantly if you were to venture out to build somewhere else.

you can always do a JV with ppl here in Somersoft who are experience in their local area.

BG
 
Hi

Hi Well done so far.

I am 30 and I am in the exact position expect I am a mortgage broker and mu business partner is a builder. We are doing a couple of projects in Melbourne.

The best advice I can give is this, you are doing well right now and seriously just keep it up.


If you are good at something just continue you it.


cheers
JP
 
Very well done. If I could go back in time I would become a builder and do exactly what you are doing. Perhaps just plan with the ownership structure a little more.

What you are doing seems to work so why not stick with it.
 
Thanks everyone for your responses so far. Yes Kinnon Bell I'm a keen fisherman, a big reason I'm working towards financial freedom haha. I'm 34 right now and would like to be taking it easy in another 10 or so years. I don't regret becoming a builder, I'm glad I woke up to myself 14 years ago.

Some valid points there everyone. Sometimes you forget to pat yourself on the back with your achievements and it takes someone else to do it for you.
 
Firstly congrats! Paying off your PPOR at age 34 is an outstanding effort.
Could I ask where you build in melbourne? You said north west which is where I am from (Niddrie).

As everyone else ha said, stick to what you know, it is clearly working and you have a skill set that you can greatly leverage in this game so utilize it whilst you can. I appreciate your end goal is probably sit back and let your investments bring in the cashflow but you should set yourself a realistic goal of when you want to achieve that. At your rate if you worked hard for 11 more years and decided to retire at 45 you could do It easy!

One thing I would Ask though is why you are doing single builds? Also your margins seem quite low? A non builder could realistically expect to be able to make 70-90k for a development project and that is paying a builder there 20%. Since you are the builder it should mean highe margins for you.
Have you ever considered tackling a triplex before? I have some builder friends who do this and make A LOT of money. A lot of money is made simply in the subdividing of the site.
 
Firstly congrats! Paying off your PPOR at age 34 is an outstanding effort.
Could I ask where you build in melbourne? You said north west which is where I am from (Niddrie).

As everyone else ha said, stick to what you know, it is clearly working and you have a skill set that you can greatly leverage in this game so utilize it whilst you can. I appreciate your end goal is probably sit back and let your investments bring in the cashflow but you should set yourself a realistic goal of when you want to achieve that. At your rate if you worked hard for 11 more years and decided to retire at 45 you could do It easy!

One thing I would Ask though is why you are doing single builds? Also your margins seem quite low? A non builder could realistically expect to be able to make 70-90k for a development project and that is paying a builder there 20%. Since you are the builder it should mean highe margins for you.
Have you ever considered tackling a triplex before? I have some builder friends who do this and make A LOT of money. A lot of money is made simply in the subdividing of the site.


Thanks Albanga. We build all over Melbourne. We are not geographically locked to any particular area. Just finished a Duplex in Surrey Hills and about to start a build in Balwyn Nth, a build in Kyneton & units in Airport West. These are all order jobs so we get to build great developments with other people's money aswell as create an income for ourselves. Our primary contract work over the last few years has been unit developments and sub-divisions with a few custom houses in the mix. I'm fairly confident in tackling the unit developments & sub-divisions, I have developed a system over time. The only hold back on these is dealing with service providers but I'm sure everyone has the same issues haha.
I'm getting to the point now where I do want to set a realistic goal which is part of the reason for me jumping on here. In the past I've had a 'she'll be right' attitude which has worked well for me but if I set a goal and have a vision I know it will benefit me. Perhaps i need some guidance on setting a goal.
With regards to the single builds, I've always done it with a single income so my borrowing capacity was limited and being the sole investor a single build was a safe bet. And regarding the margins this is for a single storey home on a suburban block geared towards the average middle income earners. The margins aren't huge on these jobs normally as there is alot of competition out there. I think that sort of margin is quite respectable on that kind of project. If your talking unit developments and custom builds then it's a difference story.

We've built plenty of triplex units aswell as four right up to a 9 unit development again all contract jobs. One of my first IP projects was a shared four unit sub-division which did well. The key to sub-dividing is getting your hands on a piece of land at the right price. In some areas where I've done the maths it doesn't seem to stack up, losing a year to preliminaries/approvals and then carrying the interest through the build, I was better off churning out a few standard houses with less headaches in that time. But unit sites is something I'm always looking out for.
 
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Hi Dan,

A very inspiring read. You have the hands on skills to do really well out of property and developing.

Regarding thrashing out a strategy going forward, MTR is an experienced developer with many contacts, including Brokers. Perhaps send her a pm and you'll probably be glad you had!

Regards Jason
 
As far as goal setting goes sometimes it helps to reverse engineer. What is your end goal and what do you need to do to achieve it? You mentioned financial freedom (fishing freedom?) so quantify that. For arguments sake, say that is $5m in unencumbered property so if you want to stick to your build / dev strategy then how many builds with what % return will you need to do. Will you sell or retain? etc etc

Once you have the big picture it's a lot easier to work through the details and work to that.
 
Wow I'm impressed, seems like you have been in the game for a long time and worked through a lot of developments. I think your knowledge and experience reinforces why you are in a great position and why I (along with probably everyone else) would recommend you keep doing what you are doing.

Goal Setting is key though and will help you establish what you are working towards. Start with an end goal in mind. Most people want to live financially free with there investments doing the work, are you the same?
If so then what does financially free mean to you? Is it 50k per year annual income (pre tax), 100k or 200k?

Let us say it is 100k, then the next question is how much money would you need and invested at what yield would give you this return? If you were able to achieve let us say an 8% yield (not easy but lets assume you invest in commercial real estate) then from my calculations you would need to have invested 1.25 million returning 8%.

So the next question is timeframe. When do you want to achieve this by? 5 years, 10, 20? Again I'll assume by the age you are 45 which goes you 11 years. Plenty of time!

Your timeframe then usually dictates what strategy you need in order to achieve. For example a short timeframe means you really cannot rely on buying rural CF+ properties with little capital growth, you likely need to buy well at market bottom for growth or like your already doing, manufacture it.

So the final thing becomes where you are at now. Well your PPOR is paid off which is fantastic! It is then a matter of how much cash/equity you already have, you may already have 500k invested which means you are already halfway there.

This is just a rough goal example and you should define as much as possible with milestones as well.

P.S - I have DA for a dwelling at the rear of my PPOR, likely selling just the land but if i decide to proceed with the build, i'll let you know ;)
 
Great work and welcome to the forum. Sounds very exciting and you have a lot of options. I would suggest making a bigger plan and see what fits in and what doesn't.

Maybe invest some spare time and learn new skills whilst still doing what you are good at. I live in Melbourne so if you are keen to catch up for a coffee give me a bell.
 
Sorry for my delay. Great forum so far, very positive. All advice taken onboard, all food for thought.

Yeah it feels like a long time, with a dad as a builder too it's kind of inevitable that it runs within. I've worked on alot of developments with some quite tricky, stressful at the times but a great learning curve. As glorious as it may seem being a builder is not always an easy gig.
@Albanga your kind of development is something we've done a few of. If you want any info on it feel free to PM me and I'll be glad to go trough it.

Currently working on some of my personal figures/expenses etc. to see where I'm at. From there I can work out how much I need to earn to be 'financially free' and then set a time frame. This will then give me a yield % to aim for on each project.
 
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