I am a 17 year old HSC student. From a very young age I have wanted to become a successful property developer. I have set myself career goals and am currently doing whatever I can to achieve them. Although I know what I want to achieve, I am still deciding how I am going to achieve my goals.
I understand that to commence work in this industry, be it renovations or construction, finance is required. My questions are to any successful property developers on this forum. Where did you come up with the money to begin developing? What type of developments did you begin with (renovations, townhouses, etc).
Thank you for your time.
George Koikas
Hi George,
Oh my goodness, can they get any younger? Makes me regret all the wasted energy I spent
How do you start? My simple answer is S W I M. This has been my philosophy from day one. Save. Work. Invest. Manage. This is the simple formula for success.
If you are working, even if that’s flipping hamburgers at McDonald’s, save your money. There aren’t a lot of people with trust funds or parents with money to throw at their kids. Maybe you’re one of them, but my point is, there aren’t many.
Save. Save. Save. There is no short- cuts. Well… there are …. some have parents who deposit their hard-earned on their kid’s first purchase. Other than that, and winning lotto, it is save, save, save.
You have to, in most cases, start small. A little cheapie, cheapie. Fixer-upper. One who can buy with $7,000 deposit + $7,000 FHOG (assuming you can borrow the rest from the bank).
Invest wisely, repeat the successful formula and before you know it, it’s multiplied.
Once you’ve invested, manage it and manage it well. A portfolio needs balancing. Whether it is shares or property. Lots of people are against selling. They just want to hold. But I tell you now, sometimes, you have to sell in order to balance your portfolio and to increase it.
You only have two hands, if they are clenched holding peanuts, you can’t grab the coconut. Makes sense? Sometimes you will have to let go in order to get a bigger one. Taking one step back and two forward, that’s a proven philosophy, too.
Take care.
Angel
Thank you for the quick response.
I'm going to have to do a lot of saving. My parents aren't able to throw too much money my way, especially if I decide not to go to University (They're very narrow minded about that).
So you're advice is to save up enough money to put a deposit on a house, assisted by money from the bank, do some renovations and sell the house for profit? Just to clarify, does this involve paying off the house after renovating and selling it?
Also, what level of education would you suggest? I'm currently in my HSC year with marks which should allow me to enter into the University of Technology, Sydney's course Bachelor of Construction Project Management. http://www.handbook.uts.edu.au/courses/c10214.html
Would you recommend this level of education, forfeiting 4 – 6 years (depending if I do it full or part time) of saving and field experience. If not, what other paths would you recommend to become better educated in property development?
George,
All the best with your endeavours, it is important to start young, I myself am only 24, however have not started full on investing, but I did purchase my PPOR when I was 22 so I guess you could call it passive investing.
I understand your situation, you have all these plans, all these ideas, and you want to make everything happen right away, just do not have the financial backing and it is holding you back, I am in the same boat at the moment. I have a lot of ideas and plans of what I want to achieve, but in the end it seems it just takes time.
My only suggestion would be to just start small, and invest within your means, at least for the meantime. Angel had good suggestions, going for some place cheap, renovating, doing it up, turning a bit of a profit, getting a credit rating with the banks, there are some decent properties in rural centres around NSW like Goulburn etc where you can get properties for around the $180,000 mark so you may be able to get financing for such a property.
I myself have been looking a lot recently about investing in the US, I know it is a lot riskier and most people I talk to don't even want to hear about investing over there. But something about it just keeps drawing me back to it. I guess maybe it is the fact that I can see 3 bedroom 2 bathroom houses on a quarter acre block that are only 3 years old, for sale for around $35,000, which are a lot nicer than the place I bought in Sydney for $350,000.
Another option to at least get your feet wet would be to attend meet ups with similar like minded people which could perhaps become future business partners so you could share the initial investment, meaning not such a large outlay for you in the first place, which in a way would minimise some risk, however there would be an added risk of more people being involved, but at the start it is always an option.
As for uni, it is definitely not essential, a lot of people have become very successful without a university degree, I myself have a civil engineering degree, it is a good way to get a formal education, but sometimes working in the field you can learn a lot more in a much quicker space of time.
Anyway just some thoughts, hope you keep your excitement for it for years to come
James
Hi George,
You are a Sydney-sider, that’s great. If you ever need grandmotherly advice come see me.
I believe in PRACTICAL education, so I reckon for what you intend to be, a TAFE course in building would be much better suited. It is hands-on learning and will get you into the workplace quicker. You will also get to know people in the industry as you do your apprenticeship.
There are many people, as James will agree, who have wall-papered their house with various degrees and who are still nowhere near where he is.
By the way James, at 22, I was not anywhere near a $350,000 property. Well done. Give yourself a pat on the back. Sharing this information will inspire many people in this forum.
Angel
Hi George,
You ask the question, “Does this involve paying off the bank after renovating and selling it?”
No, not necessarily. Once you completed a project, and wants to sell it, you can at the same time offer to buy something within the same price range. You can then do a substitution of security.
For example: You bought a house for $200,000. You originally put a 5% deposit. therefore, your existing loan on this property is $190,000. Over time you renovated. Slowly. Painfully. Agonisingly. And finally it is done. Let’s say, 18 months has passed. With time on your side, and some excellent renovation work you have a house that’s now worth $325,000.
You then decided to move up the ladder and you thought selling was the best strategy.
The house sells for $320,000. The bank releases the title of the bank to the buyer and must now be paid $185,000 (assume you’ve managed to reduce the principal balance.
If you did this, you will have around $130K (more or less, as there are also costs involved in selling).
Alternatively, you say say to the bank, “I am buying another house. It’s $300,000. I have $130,000 for the deposit and the cost of purchase.”
The bank will do what is known as substitution of security. They release the title of Property A to the buyer, and take first mortgage over the new house you’re buying.
In a lot of cases, people do what is known as simultaneous settlement. You buy and sell at the same time. In one agreed place, your bank hands over the title of the house to the buyer, takes the title of the new house you’re buying. the buyer, seller and the bank are all represented by their respective solicitors or conveyancers.
If simultaneous settlement is not feasible, you can bank all of your money in a term deposit ($320,000 less agent’s fee = roughly $312,000). This term deposit can be a security to the loan, so it doesn’t have to be paid out. I have done this three times in the past. You see, you can’t always find the ideal property to buy at the same time you sold. Although, in another thread, Richard said this is “loophole” that is being closed by banks.
I hope I explained it well. If I confused you, it is not deliberate. It will all come together as you get into the swing of things.
Angel
Where can I see you? My 2 week break from school commences next week so I'll have plenty of free time. I'd love to learn from someone who has experience in the field.
You can email me at [email protected]I've been advised to do a building course before so I'll take that into further consideration. Many people have also suggested carpentry. I'll start gathering information on these TAFE courses.
a p/t b construction management is the way to go. It covers most of the important stuff like design, services, estimating, management, engineering, law, accounting, property economics etc (& building – but that’s not so important!). Working the 6 yrs (or shortened course with 1 or 2 yrs full time) gives you a great career path & knowledge to go into other ventures.
George,
I’ve sent you an email.
Angel
1. do a carpentry course —> https://www.tafensw.edu.au/howex/servlet/Course?Command=GetCourse&CourseNo=4429
The best practical way to learn about construction. This is a 3 years Apprenticeship. But you don’t have to have an apprenticeship to get into the course2. Building and Construction (Building) —> http://www.sit.nsw.edu.au/courses/search.php?cid=26959&area=ultimo&Media_Index_ID=47
The best way to know about domestic construction. But getting into this course is very hard. They require industry experience. But still can get in if you can convince the interviewer. This is a one year course. This course allow you to be a site supervisorNote: You can do both as the same time.
George, what ever trade/course you decide to take on PLEASE PLEASE PLEASE promise us you’ll pay extra special attention to the numbers
Investing, Renovating, Building, Extending, Holding, Renting…. it is all based on figures Will keep an eye out for your progress & best of luck with your journey.Hi George,
Wishing you all the best for the future. I started young to but does not matter what age you start as long as you start some where.
I started working at Mc Donalds at 16 bought my first IP at 20 and my second at 23 sold my first IP last year making 185k
Profit…
At 26 my finance and I have moved out of home and i hardly have a mortage on our home and just bought a small bussiness. I didnt go univrsity and i went to one of the worst High schools in the west of Melbourne. Point of the story is keep strong, keep postive dont letter others drag you down and you will be allright. By next year my finance and I will be start to develop on a small scale and i cant wait!!!. If you need any advice please send us a message.
Great work from you at this point
cheers Johann
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
George, all may not be well with the property market. Many people think house prices have peaked and a crash is imminent.
Read this before you make up your mind…..
Money Morning – The Truth About Aussie House Prices and How The Property Industry Covered it Up
I hate to think of young people getting burnt so early in life. It can be hard to recover.
Tom Kline.
George you've got the right mindset. It's good to see people so young wanting to invest like i did. I'm 22 and have four properties. It's very possible but i couldn't agree more with Angel and his SWIM method. A cheap investment property with a small reno and you'll be set to expand. Good luck
TonyTony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
Some fantastic advice on here already and good to see so many investors starting young.
In response to TK Line's fears – it's a fair observation but people in the market have been making similar observation on the mining boom for decades. Property prices won't come crashing down out of the blue without some form of catalyst. In my view, major CBD properties will continue rising based on the supply / demand dynamics until the next financial crisis.
The key to any form of investment is to not pay more than you can afford. Do the numbers, understand your repayment requirements, understand your returns. If you're dipping your toes into the market for the first time, it could be difficult and take advantage of free property investment calculators that will help make you a smarter investor.
Good luck!
Jase
I'd like to thank everyone for all their advice and support. I wish I'd found this forum earlier to give me an even bigger head start.
TKline, interesting read however as JasonFonSeca indicated, I don't think that the property market is in as much strife as the article suggests. I could be wrong, my opinion is based mostly on research in newspaper articles, property magazines, and other websites I've looked at since reading the Money Morning information.
Based on what everyone has said, it's time for me to save save save while keeping myself up to date and on the look out for property gold mines.
Keep the advice coming, I really do appreciate it.
Hi George,
You're absolutely on the right track. Save, learn, keep up with the markets and learn the numbers before any investment.
I think the press have all pointed to housing affordability being a major issue for the property market. In my view, that doesn't necessary translate to a market crash for investors since this issue really only concerns home owners rather than property investors.
I think the biggest threat to the industry is potential regulatory changes – recent data has suggested to a slowdown in demand but the data realistically reflects the full year impact since the govt wound up its stimulus. See this link for recent data on the property market.
Looking ahead, major capital cities like Sydney and Melbourne will always be in high demand – expected to experience moderate growth due to the demand/ supply dynamics driven by demographic changes (domestic and international migration, growing upper middle class). Recent signs have shown that other markets may have slowed down, but the data is heavily skewed by a slowdown in Queensland due to the impact of the floods on investor demand.
I think the future is bright for you as long as you make smart decisions.
Good luck!
JaseGeorge,
Its a nice dream and a good one too.
My advice would be to educate yourself as much as possible, read every book on property you find, speak to any investor, pick the brains out of developers or anyone associated with property. Start saving and look for your investment property. If you have a passion for property than you will succeed no matter what.
Find out how the large developers started and read their background and research their previous deals, Try and work for a builder or developer and gain more experience and work your way up.
Start small on your first development, its the best way of learning.
Hope this helps.
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