Should You Do a Development As Your First Investment?
When doing your first property investment should you consider doing a development or should you stick to an easier investment option?
Ryan:What are we up to? Okay, Rob is asking, what do you think about going into the development strategy on my first investment to help fast track the process? It can be done with 60 to 80k. I’m assuming that’s the deposit.
Rather than just going super safe, super standard on the first one, just buy and hold or buying tiny because many renovation going into development. What do you think about that? You’ve done a lot of development, Ben. You’ve been in this industry for ages. What are your thoughts?
Ben: I honestly feel like anything that’s too good to be true is 100% too good to be true in property these days. There’s no such thing as getting rich quick. In fact, over ten years by doing that first, you could cost yourself hundreds of thousands of dollars if not a million dollars over ten years.
Yeah. Well, what I would say is all the stuff that I’ve been learning about, like how to become the best in the world or how to master skills and stuff that like is you can’t learn everything over night and you don’t tend to have, like you can strike lucky of course, but you don’t tend to have success if you don’t have the skills to back it up.
If you’re going into your very first investment, you basically have very little skills in terms of investing in property as a whole, so you might not understand how the whole process works or the pre-approval process with loans, working with solicitors, all that sort of stuff. There’s so much stuff that you need to learn and get proficient at to then add development on top of that, which I’m also assuming you have no experience in would make it really difficult.
If you’re a builder and you’re in that industry, that could be a different situation, but if you’re just, like, you work in IT or you work as a teacher or something like that and you have none of this experience, you just have to know that going into it, being green, not having this experience and not having those skills is going to make it higher risk than someone else that did that development, like Ben, for example, who’s done multiple developments in the past and has learned a lot.
You might go not the same development, but he might have success because of his past experience and knowledge, and you might fail. Just be careful.
Ben: I don’t even take on developments, man. I don’t flip properties. I don’t speculate. I don’t have that. I do speculate because I’m buying property in the hope that it’s worth more in the future, but these things to me are very high risk, even as knowledgeable as you can be. The problem with that sort of stuff is more in the feasibility than the actual execution. Most people just overdo their numbers.
They don’t make contingencies or worst case scenarios. They believe an agent telling them they could sell for 550 is [inaudible 00:02:51], and they out their fees on, and it’s actually 400 sale price, the agent just saw a green person coming through.
Ben: There’s so many things that you can stuff up. I think it’s much better to invest and build a foundation, and then leverage off that foundation as your knowledge and skills increase.
Ryan: Yeah. Then it can also depend on what you want to do. If you’re going to be development, going to be doing development, and you see that as your way into the future and you want that to be your career, and you’re going to do that for every single property, then it could make sense to do it and to start with a small development to get that experience, because maybe your next property you want to develop again and develop again.
That’s very different. Someone who wants to have a career in development and wants to go down that path, it makes a lot more sense than someone who’s just trying to make some quick cash and they see development as an easy way to do it.
I think as soon as you think this is going to be easy money, you need to reassess your motives behind it and relook at your goals and what you want to achieve and start from there again.
Ben: Yeah. There’s certain skillsets that people have, like builders, town planners, and engineers or accountants are very naturally good at developing stuff. Most other people’s skillsets and ways of thinking don’t necessarily suit development. The guys that do successful development over the long term are the most calculated people I’ve ever met in my life.
Ryan: Yeah. I hope that helps your question, Rob. I hope that helps you come to a decision. Obviously, it’s completely up to you. We’re not giving advice, we’re just general educational purposes only. But yeah, I hope that helped.
Hey, guys. I hope that you enjoyed the answer to this question, which came from my live Q and A episode with Ben on YouTube. We will be doing more of these in the future.
If you want to check out Ben, then he is offering free strategy sessions to On Property listeners. To find out more about that, go to OnProperty.com.au/session, and you can see all the details over there. That’s it for today, and until next time, stay positive.