During her birthday party at a local play centre (“Base Camp” in Nunawading – I highly recommend it!) I was stopped by a man with a story to tell.

Con introduced himself to me as someone who saw me speak at an event a few years ago, and following on from that he made the decision that he was going to learn to develop property for himself.

He bought a couple of Rookie Developer products (D-Day DVD & Deal Cruncher Supreme) and then set about devouring the information to learn all that he needed to successfully property develop on his own.

And as he was telling me about his first project, and the $190,000 profit, he paused mid-sentence and then told me the following…

“I know it’s a bit of an overused cliché, but this has been life-changing for me.”

Con went on to tell me how wonderful the products were, how he set aside time in his busy calendar to watch the DVD’s, to practice with the spreadsheet and to start putting into place all the things he would eventually use to complete his first project.

The most important point he made was that he took the steps to make it happen; Con took action! Action that unfortunately so many don’t take.

He then told me that it wasn’t anywhere near as hard as he expected (hearing this always makes me smile as I hear it nearly every time someone is telling me about their first project). Con was just so excited about his project, he was beaming as he was telling me about it. He called his wife over to introduce me before she had to run off after their young son.

I never tire of hearing about success stories of first, and subsequent developments. It was a lovely way to finish an already wonderful day for me with my daughters. And that night I had an idea – I so loved hearing Con’s story. I want to make the same story available to you, if you choose to take action like Con did.

Would you like to follow Con’s path? Would making $190,000 profit, part-time, on your first project be life changing for you? Then imagine the impact it would have on your life when you do it over & over again?

Well then, listen up as I have an amazing offer for you (lean in closely!)

I want to make available to you the same products that helped Con to get started so successfully, the Rookie Developer D-Day DVD & Deal Cruncher Supreme, but at a fantastic price. The products are currently available for $1,297 & $997 respectively.

However the first three (3) people to phone 0409 642 261 with their credit card ready can purchase these 2 products for just $497.

Nope, it’s not a typo! $2,294 worth of products that made massive changes to Con’s life (and many others too) for just $497. That’s nearly 80% or $1,800 bucks off – I’ll even throw in free express post delivery to your door.

Maybe you’d like to buy someone a life changing gift for Christmas? If that’s the case let me know & I’ll send a personal message to the recipient.

Check out Rookie Developer D-Day DVD & Deal Cruncher Supreme and call 0409 642 261 ASAP as there are only 3 of these available for what might be the best Christmas present ever for yourself or a loved one.

Don’t miss out as this offer will not be repeated! I can’t wait for you to be telling me your own success story like Con’s.

Merry Christmas & best wishes for the holiday season!

Troy Harris

The theory is that as most people only sell their home maybe once or twice in a lifetime, they aren’t very experienced in the process and it’s easy to make mistakes; and when you’re dealing with hundreds of thousands of dollars that could be a very costly mistake. This is a very valid point. Add in the possibility of unwittingly engaging a lazy, dodgy or just not very good selling agent and you could possibly be leaving tens of thousands of dollars on the table!

So the Vendor Advocate comes to the rescue. They interrogate various real estate agents to ensure you get the best one possible, at the lowest possible commission, without spending too much on advertising. And their services cost you absolutely nothing. This will lead you to get the best possible result, and the highest possible price, right? Well, maybe! That’s the marketing spiel of the Vendor Advocate.

Read on if you’re interested in my opinion on why Vendor Advocates are, in almost every circumstance, NOT the right option for a vendor selling their home.

The Vendor Advocate doesn’t cost you a cent. But they don’t work for love, they do get paid. How? They get paid by the selling agent, usually up to about half the agent’s commission. So you are now effectively paying TWO people to sell your home, which with TWO mouths to feed, greatly reduces the chances of a reduced commission… something the Vendor Advocate claims that they help to do. Keeping advertising costs to a minimum? Well, as we all know, most real estate agents just luuuuurve to see their name & face on billboards, internet & newspaper adverts – so do Vendor Advocates. I doubt this will help reduce your advertising costs!

Another thing Vendor Advocates claim they do so well is to seek out and find the very best agent for you. Well, to my understanding they have a select group of agents on their books, and only select for your use one of these agents. Why do they have only a few? Many agents are unwilling to work with a Vendor Advocate because they have to work a little harder, but for far less commission.

Which brings me to my final, and I believe most important point: What’s the number one thing that motivates real estate agents? Yep, the old folding stuff! Cash, and lots of it. How else do you think they can afford to pay the lease on that shiny black BMW every month? Or those way too expensive suits? So, by working with a Vendor Advocate, they hand over up to half of their fee. Doesn’t make a lot of sense now does it?

Let me give you an example of why engaging a Vendor Advocate works against you:

You & I live next door to each other and we have very similar homes. The same builder constructed them 20 years ago, and apart from the spa you put in out the back a few years ago (don’t worry, I’ve resisted sneaking a look over the fence at your naughty sounding parties last summer ) and I’ve renovated the bathroom, they are worth about the same price. Nearly identical really. We both decide to move, and put our properties on the market at the same time. You choose a Vendor Advocate, who selects on your behalf John from ABC Real Estate. Unbeknown to each other, I interview a few agents, and select John from ABC Real Estate.

John is really happy, two adjoining properties, nicely presented, should attract a lot of buyers – and they do! John has mine open for inspection at 12:00pm on Saturday, yours at 12:30pm. Most buyers walk through mine, then onto yours. Interested buyers start putting in offers, all at around the asking price (which are of course the same as each other, being the same value). Great! However, this is where it gets interesting. As the properties are the same, buyers are interested in both. Where the agent earns his money is getting the very highest price for the property. But what John does next is very interesting…

The more they sell for, the more John gets – but when he sells mine, he gets up to TWICE the commission that he does for selling yours. This is accentuated even more as the price rises. What does this mean? It means he is likely to direct the best buyers to my home and away from yours, working very hard to convince the buyers that mine is the better property, and hoping to get the highest price for mine.

Sure, only one person can buy mine, so the second highest bidder will surely buy yours? Maybe. Even if he does, does it mean you will get just about the same as mine? Maybe not! As the agent has been telling everyone how wonderful mine is (so he gets more money to upgrade to the latest black BMW) he is directly or indirectly telling buyers that yours is much lesser of a property than mine. The end result is that yours sells for a lot less than mine!

Don’t believe me? I took the liberty of asking the thoughts of a local real estate agent in Croydon North, David Stewart of Market Share Property, his views on Vendor Advocates.

Troy – “David, does an advocate protect the interests of a home seller?”

David – “In theory, yes. The practice is actually a very different thing. While advocates long claim to not cost their clients any money the reality is that now that two companies are involved in the transaction the fee has to come from somewhere. There is no incentive on the part of the advocate to truly be objective for their clients. They have a vested interest in keeping the fee as high as possible to ensure that their pay packets are protected. It is unrealistic to believe that a real estate professional, be it an advocate or sales agent, will willing reduce their own pay packet, so the client ends up paying much more than what they otherwise would if they did the negotiations themselves.

Secondly, most advocates have pet agents. Ones that will be at their beck and call, and not ask too many questions. This is rarely the hallmarks of a good agent – instead you get a very compliant and subservient agent who is only interested in protecting the advocate to ensure further business. This is not the sort of personality you want representing your home to prospective buyers.

On the whole the advocate business model only serves to add an extra layer of complexity to the sale process and the homeowners are very rarely the winner.”

Well there you have it, another real estate trap exposed!!

It is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. The term commonly applies to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target property.

As Troy has told us many times before, he has NEVER bought a site without it being subject to Due Diligence. Some Real Estate agents will try not to accept, but be firm. It will cover you if there are any issues on prospective site.

Why do you need it? Basically, the due diligence process is time consuming and costly. You don’t want to go through it only for the vendor to sell to someone else or put the price up. So what Troy does is lock in a purchase price and conditions it “subject to X # of days due diligence to the purchasers satisfaction”. That way the vendor must go ahead with transaction, however you are able to withdraw without cost should something not stack up. Please note that this is what Troy does and I suggest you get advice from your solicitor to ensure that you write your conditions on the sale of contract correctly.

Where do you start?

This task may seem daunting at first, but the more properties you look at, the more confident you will become in your selected area. So find your prospective property, start your due diligence at your first site visit. If it is feasible for you to purchase, then negotiate a good price and settlement and any other conditions that you require and sign the contract subject to Due Diligence as per above.

What needs to be done?

1. Contact your solicitor and make sure they are aware of your activities. Ask them to look over contract to see if there are any concerns based on what you propose.

2. Ensure the property has appropriate access to services, particularly sewer and stormwater. Contact your local water authority for this information. Just because an existing house does have the access, doesn’t mean your new development will. Don’t go unconditional until you are certain of your proposed layout of works. This is the # 2 killer of a project (# 1 is of course getting the numbers wrong)

3. Determine if there are any trees on the property or surrounding boundaries that you think may be an issue.  Contact an Arborist and get them to go out onsite if you have concerns. Find out whether the trees on the property are removable or what effect they will have on it. Sometimes you can work around them, and they become features of the site. Sometimes minor alterations are needed and not very costly however others will cause you to abandon a project as one or more units will not be able to be constructed as anticipated.

4. Contact a Draftsperson or architect and get a concept plan drawn up. Make requests as to the type and design of plans as per your market knowledge. Discuss his/her confidence of this application successfully going through council or any other authority required

5. Employ a Land Surveyor to complete a boundary re-establishment survey – You need to make sure the block is what it should be, and that the boundaries are where they should be. You may need to get surveyor to measure heights and falls for sewer, storm water and possibly flooding too. There may be other concerns too, so check with land surveyor, preferably on site.

6. Speak to the local council regarding a planning proposal, and the likelihood of them approving your layout. It is important to consider zoning, and any other overlays, covenants or similar that may adversely affect your plans. Also ask the local council who this application would be referred to (e.g. VicRoads or MFB) and then contact them to see if they have any issues with the proposal. You may need to solve these problems before going unconditional or even walk away.

7. Getting a soil test is also something that is suggested to be part of your due diligence. You don’t want to find out there are very costly issues underground after you own the site.

8. You need to determine the end value of your product, so contact many local Real Estate agents and ask them questions pertaining to your prospective development. How much each unit would be worth depending on size, number of bathrooms, garages etc. Then add this to your own extensive experience in researching the area and decide on what the market would pay for these proposed dwellings if they were available for sale today. Never factor in the market increasing by the time you are ready to sell. If you need this for the project to be viable and/or profitable then it is a highly risky proposition!

9. Crunch your numbers, then crunch them again. Ideally you will have a good understanding of the numbers before entering into the contract, however this period gives you the opportunity to fine tune further, as well as alter anything that you become aware of doing your due diligence.  Our 5 Minute Deal Cruncher Supreme is perfect for this.

10. As all sites can vary, there may be other things to consider as well.

What do you need to do before going unconditional?

So now that you have the basic list of Due Diligence items, what do you need to do? Before signing anything unconditional, make sure all the above places have been contacted and that they do not have any issues in their area of expertise. If there are any concerns, find out the solution and the cost involved in this. Have another look at your numbers to see if the project is still viable for you.

What not to do?

Don’t abuse this condition and go and make offers based on guesses and then walk away from the property. Very quickly you will get known for it and won’t be taken seriously. Also, while I encourage you to negotiate the best possible deal for yourself, remember there is another party involved. Don’t adversely affect them just by playing around. Ideally, you both agreed to price and terms, you complete your due diligence satisfactorily and purchase the property to complete a development simply, safely & successfully!

Finally, Troy has never walked away from a property under due diligence clause, however it is an insurance he will need to use one day I am sure.

Find out where asbestos can be found in your development property, the risks and what to do with it.  Whether you are keeping the existing house and renovating, or demolishing it make sure you think smart and think safe.

So what is Asbestos?

Asbestos was commonly used in building materials between the 1940s and the 1980s. Asbestos was used because it was fire resistant, durable and an efficient insulating material. Generally asbestos does not pose a risk unless it is broken, deteriorates, or is disturbed in a way which causes dust (containing the asbestos fibres) to be produced.

Asbestos exposure has been linked to a range of disease including lung cancer.

Did you know that it is hard to determine whether a building material contains asbestos unless it is tested in an accredited laboratory. So if you do not want to test the material it is best to assume that it is asbestos and treat it as such. Better to be safe than sorry.

As found on www.betterhealth.vic.gov.au asbestos found around the home is generally as follows

Asbestos can be loosely or firmly bound. In older homes, firmly bound asbestos may be found in the following materials:
• Exterior fibre cement cladding (Fibro) and weatherboards (pre-1984)
• Artificial brick cladding
• Flexible building boards – eave linings, bathroom linings, cement tile underlay (pre-1984)
• All corrugated cement roofing
• Flue pipes (pre-1988)
• Architectural cement pipe columns (pre-1988)
• Patched or repaired plaster
• Textured paint
• Vinyl floor tiles or coverings.

Loose asbestos was rarely used in domestic situations; however, it is possible that loose or knitted asbestos fibres may be used as:
• Insulation on hot water pipes
• Insulation in old domestic heaters
• Insulation in stoves
• Ceiling insulation products.

So how do you remove asbestos?

Well you could do it yourself. There are a lot of guidelines and requirements that you need to follow and you would need to be confident that you can follow the guidelines as it is your health and others around you that is at stake.

Or you could hire a licensed asbestos removalist. This is what we do. If you are unsure of how much it is going to cost then call one and ask.

Don’t be afraid of asbestos just know what it is and how you can remove it and for how much. Once you know all these factors it becomes just another checkpoint for each of your developments.

* please note that the information for this article was sourced from the following websites: www.betterhealth.vic.gov.au

But seriously how long do you have to wait for the council to reply? Well in Victoria it is 60 days. And from a developer’s point of view this is a looooong time to wait.

And did you know that if the council requests for more information from you then the 60 days starts again. Then it will feel like the whole process is being drawn out. It can be like the 90 second warning at McDonalds drive through. The alarm bells are ringing at the council on the 58th day and all of a sudden you receive a request for more information from the council. AND the 60 days starts again.

Let’s say though that the council does not contact you in the 60 days, what do you do? Do you go to VCAT (Victorian Civil & Administrative Tribunal)? If you go to VCAT how long will it take for them to review your planning development application? Is it worth the wait?

If your council does look like they are going to take longer than the 60 days contact the council planner and ask them when the decision will be made and what the decision is likely to be. It would be rare that a council will deliberately delay past the 60 days. You may find that your council is just really busy (or really slow). Or maybe your proposal is a bit controversial and the council wants to allow the time to tick past the 60 days so they do not need to make the decision on your application.

What I can tell you is that it WILL feel like the council are taking their sweet time reviewing your application.

Right – now you need to do some SERIOUS research don’t you?

I really do hope that you are not just looking at www.realestate.com.au (or similar websites) and just talking to real estate agents. There are many more things that you should be doing.

For starters – what is the Local Council planning in your area of choice?

You should know by now that Local Councils have designated some areas where they are more inclined to support development than other areas, where they would just frown upon it.

Does that sound like something worth knowing?

This is not something the real estate agents or realestate.com.au tell us. This is something you need to find out by asking questions and looking for the information.

DO you know the better areas and the not so good areas of the suburb?

A few years ago, I purchased a property knowing that the units across the road were crappy but what I did not know was HOW bad that street was in the suburb. I thought the suburb was a lower economic suburb so I thought this was a typical street. Noooo.

The Moral of the story, get to know your suburb – the good, the bad and the ugly. Find out how who they are, what they want, where they want it and for how much.

While I did end up getting my expected price in the end, they did take longer to sell than any of my other developments.

Detailed local knowledge would have taught me this a lot sooner.

Go to:  https://www.facebook.com/RookieDeveloper

Getting back to the issue at hand, here is the post:

Hey guys, how are you? Has the recent changes to the planning code made you do extra due diligence on target areas because of the possibility the council will potentially follow Glen Eira’s implementation? Height restrictions probably don’t matter too much to people like us but the two-dwellings-per-lot restriction is a bit of a worry. Has anyone had any confirmation from the other councils on their intentions to implement the new code?

You can read all about it on the links provided below:

http://www.theage.com.au/business/property/lowrise-glen-eira-to-fuel-sprawl-20130805-2ra8t.html 

http://www.gleneira.vic.gov.au/Council/Media_and_news/News/Height_limits_over_all_residentially_zoned_land

Here is my reply:
I believe the intention is to clear up some grey areas around what can and can’t be done in any given area – i.e. more clarity for all.

Whilst I have doubts it can be done with the clarity it is intended (I’m yet to see any government achieve this in any area), I believe this is a “Boom” for developers as there will be more black and white ruling, less personal interpretation/personal preference at council planning dept.
Its effect should have less refusals for appropriate developments, less approval of inappropriate developments, and that’s good for everyone.

Let’s hope that’s how it plays out.

So to answer your question, you should be absolutely certain about the success of your proposed development in that given location prior to buying. Nothing has changed there!

I would love to hear if anyone else has any comments to make on this situation.

Keep Safe and Happy Developing.

When you get a quote from a drafty you know there will be many factors to take into account. Things like how well they design the homes. Will they cost you more money if they design your homes badly. When you hire tradies you know there are many factors to coincide such as what will they do, the quality of the work, who will be organizing the supplies etc etc

But with demolition there is demolition or demolition. The only difference is quality. Will they annoy your neighbours? Will they get rid of EVERY scrap of the demolition including trees and what is their timeframe?

But I strongly suggest you get a few quotes.

One of our projects was quoted $15 – $28,000 to demolish and clear the site!!!! That is $13,000 difference. What is the $28,000 guy going to do that the $15,000 guy won’t do?

The more items and materials that are salvageable from the property the less it will cost you to have the house demolished. For example how much can the demolition man get for the oven (if anything)? What is that window worth – is it worthwhile selling? Other items such as floorboards, bricks and heritage style items. Plus items such as copper and tin is generally scrapped.

And just a reminder if you have to pay and organise temporary fencing for the demolition company, and decide to keep the fence for the whole time of the construction, make sure the builder is not going to charge you for the fencing! Who wants to pay for it twice?

So remember get more than one quote. You may be pleasantly surprised.

Pretty impressive!

In fact, it’s the second highest result for the industry since Super was made compulsory way back in 1992. Only 1997 was better!

Now don’t get me wrong, these numbers are good. Very good.

Indeed if these rates of return were produced year in year out, you’d double your money in under 5 years, and triple in under 8 years (assuming reinvestment)

However, over the same period, the ASX 200* returned 22.8%, around 50% better return on investment.

*ASX200 is basically the largest 200 Australian Listed Companies, and there are various funds you can buy into that replicate this simply by buying equivalent amounts of each of these 200 stocks for you.

So, just holding a share portfolio containing the top 200 companies, or more simply a fund that does, would therefore double your money in about 3 ½ years, triple it in 5 ½ & have 5 times your original investment in under 8 years (assuming reinvestment)

If you invested $100,000 of your super in the average growth fund, and it returned the same as it has over the last 12 months, and invested the same amount in a ASX200 fund under the same conditions, at the end of 10 years your super fund would hold $368,655.32 & your ASX200 fund a whopping $635,016.93 #

Now doesn’t that make quite a difference?

While the Super industry is shouting from the rooftops how good they are, is it a true reflection of what was a good result over that period?

So again, the lesson is to always do your own research, never rely on what others will tell you is a great investment.

Control your own destiny!

# not accounting for fees etc

Well thank my lucky stars!

I opened today’s Herald Sun to read with my special weekend bacon and egg muffin & coffee, and on the front page beamed WHAT YOUR HOME IS WORTH [p16].

Being interested in property, and what the value of my home is, I flicked to page 16 & scanned to find my suburb.

I’m one of the fortunate ones, my house is worth 6.8% more than it was this time last year, according to the median* price.

WOOHOO! (Yes I did do that with a Homer Simpson voice!).

Based on those numbers, my house will be worth double in about 10.5 years, somewhere close to the historical average across Melbourne for the last decade or so.

Great news!

But what does this really mean?

Does it mean I can stroll into the bank with newspaper in hand, and get my line of credit increased by 6.8%!

No?

The bank wants my home independently valued.

Not rolled in with everything else in the suburb?

So how do they work out a suburb’s median* price?

Well, based on what sales prices achieved by all the houses that have sold in my suburb over the last year.

New ones & old ones, best streets & worst streets, big ones & small ones, good areas & bad areas, and large lots of land, or very small land sizes.

They take these numbers, and draw the median* price for the suburb, and then determine whether my house (& yours) is worth more or less than last year.

*median is not the average price, but drawn from the ‘middle’ price. If there were 5 sales lined up from highest price to lowest, the 3^rd sale – the middle number of 5 sales – would be median price

e.g. 5 sales as below, middle sale being number 3 @ $500,000 is the median price, but $465,000 is the average price. Please note I do NOT believe either method provides anything more than an extremely rough guide to the value of any individual home within the given suburb

1. $510,000
2. $510,000
3. $500,000
4. $405,000
5. $400,000

So back to the bank

They often lend a certain percentage of the value of the security, in this case my house.

If this was 80% of last year’s median* price of $440,000, my line of credit (LOC) would be $352,000, this year it would be $376,000.

So that’s $24,000 I can go & blow on a boat or a world trip, right?

Well, no.

A good example of how misleading median* prices can be I found when scanning some of the other suburbs, I found the median price of inner suburb of Albert Park has dropped by a staggering 25.4%!

So I decided to look at nearby suburbs to see what occurred there.

I was equally astonished to find that next door neighbour suburb of Middle Park had increased by 37.9%

WTF?

REALLY???

So if you owned 2 properties, literally across the road from one another, one in each of Albert Park & Middle Park, that last year were each worth an even $1,000,000, your Middle Park property is now worth $633,000 more than your Albert Park property of equal value last year. ($1,254,000 vs. $621,000)  I’d cross the road for that amount of money – wouldn’t you?

Whilst this is obviously an extreme example, do you really think the values of those 2 virtually adjoining properties could be misaligned by anything more than quite a small margin?

As a property developer, one of the hardest things to determine is what will be the value of the dwellings that I am creating. Without highly accurate numbers, any given development project could be out by several hundred thousand dollars, and I don’t need to tell you the impact of that!

In our $100K Club Mentoring Program we spend a lot of time on determining HIGHLY ACCURATE values, and we certainly don’t use median* prices to do so

If you are buying or selling property, and especially if you are developing property, do thorough research into what each and every individual properties true value is. Or you WILL be sorry!

P.S. if case you are wondering why I placed an asterix next to each use of the word median* it is because an asterix is often used when there is a disclaimer to what is written. Personally I believe that there should be an asterix next to the use of the word median* because it is simply not an accurate way of determining the price of every dwelling!