The Process For Building A Brand New Property: Part 4/4
What is the process for building a brand new property? Once you have signed on the dotted line what happens next and what do you need to do?
Hey guys, Ryan here from onproperty.com.au, helping you find positive cash flow property. And welcome back to video number 4 in our 4-part series on how to build a new-build property. So I’ve got with me Ben Everingham from Pumped on Property, who’s my new-build specialist.
Ryan: Hey Ben, how’s it going?
Ben: Good day, Ryan. Hey, guys, how are you?
Ryan: In this episode, we want to talk through, really, the process that you’re going to have to go through once you’ve signed up with a builder, you’ve gone through all your negotiations, you’ve started the build, what are the sort of things that you’ll need to deal with and you’ll need to go through after that point to get the property through to completion and to get it finished and so you now own that property, it’s rented out and it becomes the investment that you want it to be.
So, Ben, let’s say we’re at the point – you know, we’ve done our negotiation, we used all the input from video number 1 to really research our suburb, to research our area, to choose the right development, the right block and to get our design – we’ve done all that we’ve avoided the mistakes that we talked about in video number 2. And then, in video number 3, we’ve gone through those steps to avoid overpaying for a property.
We’ve sourced out own land, we’ve negotiated and sourced a builder. So, we’re at that point where we’re signed off with a builder on a fixed-price contract – because we really want that, the fixed-price contract, we’re very clear about that. Where do we go from there?
What happens next for people? Because I bet people are kind of pretty nervous about that. They don’t know what the process is going to be like. So let’s talk them through it so they can really understand, this is what your life is going to be like when you’re building a new property.
Ben: Alright. So, the first thing you can expect is to be really disappointed, because –
Ryan: That’s no good!
Ben: This is just being honest with you. After you’ve done everything and it’s all done and dusted and locked away and you’ve got your finance and you’ve got your build locked in, all the sudden, nothing happens for a period of time because the builder’s got to go and do all this stuff behind the scenes. The builders got to go get the plans certified, he’s got to go get soil tests, engineering drawings.
The build’s got to go through accounts, so the build’s got to be scheduled. So, you can generally get to this point where you sign off and you’re so excited and you think your slab’s going to go down the week after and everything’s going to start. And in reality, it can sometimes take anywhere between 2 weeks and 3 months for the builder to physically get that property to site.
Ben: So just know that it’s going to be a bit slower after you sign up than you want it to be – with anyone.
Ryan: Yeah. So, it’s really exciting leading up to the sale. You’re committing to hundreds of thousands of dollars. And then afterwards, you don’t actually have to do anything, do you? The builder does all the behind the scenes stuff to get the slab ready to go down.
Ben: Yup. So, basically, the next step after they’ve done all that stuff is that they will give you an email or a call and say, we’re planning on putting the slab down on this particular date.
Ryan: In that period where we’re doing nothing, should we be calling our builder keeping in contact with them make sure everything is going smoothly? Or do we just leave them to it?
Ben: I like to contact the builder once every couple of weeks if they’re not contacting me. Because the builders are notorious for not contacting you unless there’s an issue or they need money. So, contact them once every couple of weeks, just ask for an update and that should be enough.
Ryan: Okay, cool. And so, they’ll then let you know slab’s going to go down on this date. What happens then? We pay for the slab after it goes down, don’t we?
Ben: Yeah. So, basically, you’ll pay initial deposit. And then, a slightly larger deposit. The next major payment will be – because a build, you don’t pay for the entire thing upfront, you pay in 5 or 6 milestone payments. So, basically, the slab will go down and then you’ll be invoiced for that or you’ll be invoiced for the slab just before. In reality, it’s just a one-page form to your mortgage broker or bank manager saying, yes, the builder’s given me the quote, it makes sense.
I’m happy to sign off on this. And you send it back to them and then they send through the payment. And that same process happens again and again, 5 or 6 times throughout the build.
Ryan: Do the banks go out and check and certify that, yes, the slab’s been put down so I’m happy to release this money?
Ben: No. So, the banks basically do a valuation based on the land and the building contract at the start and then the bank will also go out at the completion of construction and go, yup, everything’s as per what we thought it would be. It still values up. And that’s it.
Ryan: So, should we be double-checking things as they happen before we pay? Like, should we go and check the site to make sure the slab’s been put down before we release those funds?
Ben: Generally, I haven’t personally done that. I think that’s probably overkill because the builder’s going to send you – a good builder and any builder that I work with is going to send you a photo going, hey, here’s your slab, here’s your frame, here’s your roof, here’s your whatever – at each different stage. A good builder is also going to give you a call or a fortnightly update. So for all of my clients, they get a fortnightly written update with photos from either me or from the builder going, everything’s progressing the way that it should be. Yes, your money is actually being spent on what it should be, not on holidays for the builders in the French Alps or something.
Ryan: Alright, so slab goes down. Again, are we doing anything? Or it’s really just happening and someone else is project-managing it?
Ben: You don’t have to do anything. There’s a huge amount of people that feel like they have to do something and they should keep busy and you see those guys rocking up the side every second day to look at tradesmen with their shirts off, walking around – I don’t know what they’re trying to look at. There’s not too much you can do.
I do like to get out to site every now and then, just to make sure that the quality is okay. Because if you do, for whatever reason go down that path of buying the cheapest of the cheapest, you’re going to get a cheap product and there is going to be issues that will one day be hidden behind a wall that you can’t see. But, again, most of the time, you’re not going to know what you’re looking for, either, unless you come from a trade background or have someone from a trade background come out with you.
Ryan: Yup. What other processes? So, it goes slab, then it goes, what, walls or the structure or something? And then, what are the steps?
Ben: Yeah. So, basically, slab goes down, the frame goes up, the roof goes on. There’s another stage called “rough in”, which is basically the plumbers and the electricians putting all the stuff in the walls before the plasters go in and sheet up the walls. So, basically, at that time, you’ve got a house that somewhat resembles a house now. Because you physically got walls and then, after that, all of the internal things start happening at different stages.
So, you know, for example, the bathrooms, the kitchens, the cabinets, all of those sorts of things start going in. And then, there’s obviously, the final bits and pieces, like floor coverings, window finishings, carpets. And then, a final clean at the very end.
Ryan: Yup. I guess, if people have followed your advise and sourced a fixed contract, then there shouldn’t be any unwanted surprises in that scenario and it should just be, this is our schedule. We’ve done this, here’s your payment. We’ve done this, here’s your payment. The walls are up, here’s your payment.
Sounds like a pretty simple process. Do people often get unexpected things that throw a spanner in the works and cause issues?
Ben: The only way that an unexpected thing could occur is if the builder doesn’t do the right due diligence upfront. For example, I saw this build a client of mine is doing in the Sunshine Coast recently. There was an existing property that had been built on the front – on the front half of the block – and someone hadn’t done their research properly and there was this natural waterway running through the very middle of the property when the Council clearly said that you needed to have 10 metres on either side of that waterway. So, obviously, because our applications, they’ve done the right due diligence it’s been flagged on our block.
It’s also unconsciously caused the other block to be flagged. They’ve got this completed product. The Council’s not going to tell you to come knock over their house but they’ve gone and asked that person for another $10,000 because they didn’t comply, which the builder may or may not take responsibility for.
Ryan: Okay. That sounds like a very strange error or strange thing that will happen. It’s probably not going to happen to most people.
Ben: Those things aren’t going to happen to most people. The major price changes you’re going to get is you making physical changes to either design or inclusions throughout the build process that the builder wasn’t aware of. And that’s when you’re going to get stung for extra money or you haven’t got your fixed-price contract and now you’re being charged for a driveway or a whatever fence that you didn’t know that you had to pay for that wasn’t included.
Ryan: And then, basically, the end would be everything’s complete. I guess you would pay the builder the last instalment and the bank will then go and value the property and then you’d get the keys. Is that what happens?
Ben: Yeah, correct. So, you basically go through the property. If it’s in another state, we go through the property. Either us or your buyer’s agent or a friend or you go through the property at the very end with the builder. At that time, it’s a big project, there’s going to be things that are wrong with the property. So, it’s called a pre-handover inspection and at that time, you go through with stickers and you might end up leaving a couple of hundred stickers around the property for all the minor defects.
The builder will then go through and fix those minor defects. It might be paint, it might be paint on the window, it might be a scratch on a tile. Whatever it is, it might be a tap not working or a door handle not working. They fix those things and then you get the keys at handover.
And then, the builder’s got another 13 weeks of what you call your maintenance period for you to go and have a look at the property again and if there’s any issues, the builder will come and fix them up. Obviously, at their own cost. And then, everything’s got its own lifecycle in terms of insurances as well.
Ryan: Okay, cool. It sounds pretty straightforward, I guess, in that last step where you’re going through the handover with the builder. You want to be pretty specific and look for as many things as you can and get them to fix that there and then, right?
Ben: Get on everything, because that’s your best opportunity to get things sorted. So, if you’re not detail orientated, take someone with you that is very detail orientated.
Ryan: Yeah. Like, I’m not detail orientated so if I needed to do it, I would totally have to take my sister or someone that sees all the little details – or my wife, she’s pretty good.
Ben: We created a 12-page checklist for ourselves that we now use for our clients because, naturally, I was missing things. Because you’re so excited, you’re going through your new property. So, some sort of checklist like that, the builder will give you something like that, anyway. It’s just going to make sure that if you just follow every single step you’re not going to miss anything.
Ryan: Yeah. That’s what’s so good about checklists – Is that you can just go through and you can make sure that you haven’t missed something. So, let’s say there’s someone interested in building a new-build property but they’re a bit overwhelmed with the whole process – with the finding land, with researching the area, with negotiating, with managing the build, with doing that final inspection.
There’s a lot of stuff, there’s going to be some people out there who want help doing this. How can Pumped on Property help? Because you guys are a buyer’s agent and you help people do this. How do you help those people who want that extra support?
Ben: Yeah. I think the simplest step is to, honestly, just organise a time to catch up with us. Which, Ryan, we’ll talk about in a minute. Like a 15-minute meeting to talk about your current project or situation or your plans for a future project or to book a more in-depth sort of – if you think that we’re the right partner for you. Then, book a 60-minute session with me and we’ll really get to the guts of what you’re trying to do. Not just for this property, but moving forward. So that at least, if you do decide to move on your own, you’ve got confidence and I’m more than happy to spend that time with you guys, helping you gain that confidence.
If you are one of the people that think you would like a hand or you don’t have the time or it’s just too hard or whatever. You want to outsource it, then we do help 7-15 people per month do exactly what you’re trying to do and the majority of those people get extremely, extremely good outcomes and are very happy with the experience. So, more than happy to sort of step you through every single step of the process, hold your hand, coach you so that you can learn how to do it on your own and, I suppose, transfer what’s in mind from doing it so many times into your mind. That’s really what you’re paying for.
Ryan: That’s the thing. If people are looking for help, you want to get someone who has expertise in the area, and also someone who’s going to get you a good result in the end. We’ve talked about in previous episodes, one of the biggest mistakes people make is they go through property marketers where they’re getting a free service but they don’t actually know the hidden fees or hidden commissions that these property marketers are getting.
The thing that I like about Ben and the reason why he’s the only buyer’s agent that I work with and recommend, is that he has transparent fees and that you’re paying him. He’s not getting paid to sell a particular product. So when it comes to doing what we talked about, you know, sourcing a market, looking at a suburb and stuff like that.
He actually does that for his clients, not just for new-build property but for existing property. And I think it’s really important, when you’re going with someone, go with someone who doesn’t just do new-build property. Because then they’ve got all their eggs in one basket. But to have someone who really understands investment, who’s financially free themselves, like Ben, can really help you.
He’ll go through with you and talk about your goals and things like that. He’ll go through the market, they do their due diligence. And then, he can go through everything and source a site for you, work with builders to get quotes and do that negotiation upfront. And then, also, walk through the process. As you were saying, take photos throughout the build and then do that final inspection for people. And so, it’s kind of like armchair investing.
We wanted to open up Ben’s services to you guys with a free strategy session. We also want to provide you guys with a free checklist that if you do want to do this yourself and negotiate with builders, then that’s going to give you the different line items that you need to go through on the quotes. So, if you need to get that and you want to get that checklist and setup a free strategy session, there will be links below this video, so you can go ahead and check that out.
You can do a 15-minute session with Pumped on Property to just really understand, okay, what are my goals? What are some of the things that might trip me up? Or, if you’re more serious and you need some more help. then maybe that 60-minute session might be better for you.
What’s the difference between – let’s talk through like someone who wants the 15-minute session versus the 60-minute session. How can people identify what’s going to be best for them? What are we going to cover in each session?
Ben: If you know that you want to move forward and through the video series, you’re happy to work with someone like myself, then the 60-minute session’s definitely for you.
Ryan: What are we going to cover in that 60-minute session? If someone says, yup, look, I’m keen, I need some help. Pumped on Property might be a good partner for me. I’m going to do the 60-minute session.
What will someone expect from that session?
Ben: Sorry. So, in terms of expectations, we’ll literally look at your goals personally and from an investment perspective for the next 1, 3, 5 years. We’ll get extremely clear on those goals. We’ll look at some of the challenges that you’ve currently been facing and then I’ll be able to answer absolutely any questions that you guys have.
We’ll begin to piece together a concrete strategy for you moving forward for the next 5-10 years. And then, we’ll also get to the real guts of that next purchase you know, by the end of the call, exactly what you’re next step should look like, where it should be, how much you should be spending and what your outcome needs to be so that you can get laser-focused and get a filter on what you’re trying to achieve.
Ryan: Yup. If you guys want to sign up for that free strategy session and get the checklist, just go to onproperty.com.au/pumped, so P-U-M-P-E-D, in order to get access to that and book that strategy session.
And then, for the 15-minute strategy session, who would that suit?
Ben: Those are the guys that just have questions. You’re doing an existing project or you just need an introduction to a builder or you just want to talk further and see if once you’re not watching me here, but when we have a conversation that we’ve actually got alignment. For anybody that’s undecided, sitting on fence that wants to consider if building is actually for them and just needs some honest, sometimes brutal, advise. That’s who the 15-minute session’s for. Anybody that’s sort of sitting on the fence and is undecided.
Ryan: Yeah. I think one of the cool things that you guys will get out of that session is you’ll go through – whether you decide to go with Pumped on Property as a buyer’s agent or not, you’re still going to get heaps out of that session. You’re going to begin to understand, okay, well, what are my personal and financial goals? Because a lot of people don’t actually have that set. So, Ben can help you really look forward and say, okay, well, what do you really want to achieve in the future?
And then, you can also get an understanding, okay, is a new-build property actually going to be a good strategy for me? Or, can I get the financial result that I want from an existing property?
After those strategies, Ben was telling that you then go through suburb research, you go through previous sales history, all of these details. Do you want to quickly talk through that? And then, we’ll let people get on their way.
Ben: Cool. So, yeah, the next step after we’ve decided you do want to be a client, it’s really locking in that second session where we get super deep into your strategy, we get super deep into the market that you should be marketing, the suburb, the exact type of property, so that you walk away with clarity and that’s a 2-way conversation.
So, I’ll just share what I think is the best of the best right now in terms of areas to invest in Australia, based on our research. And then, you’ll be able to walk away with 10 suburbs to sit down with on your own or with me or with your partner and come back and we’ll have a third session after that, which is, okay, this is exactly what we’re targeting. This is why, because it links with our long term strategy.
And then, from there, it’s just a matter of us going out and actioning that. We’ll normally find you an outcome within 2-8 weeks of you becoming a client of ours. Obviously, we’ll hold your hand all the way through the process.
Ryan: Yup. And so, if they decide they want to go new-build and you’ve worked out that to be their strategy, will you guys source all the land? How do you choose your builders? Do you want to quickly talk about how you manage that process for your clients?
Ben: Yes. So, after we’ve identified the market and the suburb that we want to target, at that point, I will go out on your behalf to the marketplace and source you land direct from developers at the best possible price in the best locations. And then, I will also go out to the building market. We generally partner with 3 or 4 builders in each state. Those builders have been tried and tested by us or me personally to be builders that I can trust that give you that fixed-price upfront.
So, I’ve pre-negotiated with all of those guys anywhere up to, say, $20,000 to $30,000, $40,000 off the price that you’d actually be able to walk in the door and buy directly from them. That is just me based on me understanding how to negotiate with them, understanding what’s important to them. And also, I suppose, bringing a certain volume of clients through them per year. So, they generally will give you a 24% margin is what they’re looking to make profit-wise. We might get pricing at 16%, for example, which is significant over a $200,000 or $300,000 project.
Ryan: Yeah. Well, a saving of, what, 8% across $200,000 or $300,000 really adds up. So, you can see why Ben has become such a popular buyer’s agent and why people have been working with them. Again, if people have watched video number 3 and they’re talking about negotiating with builders, you can see that it is a hard industry. But once you know the industry, and when you’re working with people that you trust, then you can negotiate with that.
I guess, someone who’s going to do it themselves isn’t necessarily going to understand all of that and be able to get the deal that you yourself would get.
Guys, if you want to check that out, get that free checklist that we talked about and book a strategy session with Ben, go to onproperty.com.au/pumped and you can get access to that, absolutely free – free of charge. There’s also no commitment guys, I work with Ben because he’s transparent, because he’s a lot like me, and because he’s not a hard, pushy salesperson.
I wouldn’t want to recommend anyone to you guys that is just going to do something dodgy or just make you feel uncomfortable. One of the things that I love about Ben and feedback that I get from people that I send to him, is that absolutely love the way that he does business, how cruisy he is and just made me feel confident as an investor.
So, Ben, I just want to thank you for the work that you’ve done with customers of mine already and hopefully, people found enough value out of this video series to either do this themselves or to employ your help, if they want. And just so everyone knows, I do get a referral fee from Ben if you end up going through OnProperty or if you let him know that you came from Ryan OnProperty.
I think that finishes off the series. We talked about choosing a property, not making mistakes, how to not overpay for a property, and then, the entire process of buying a property. So, people are going to be so much more knowledgeable after this. So, a big thanks to you, Ben, for all of your knowledge and for being willing to share that with people.
Ben: Thanks for the opportunity. I really enjoyed myself, actually. It was good to sort verbalise some of this stuff.
Ryan: Yeah. It’s good to get this stuff out and so good for me to understand, okay, this is what happens. This is how the industry works – and stuff like that. And I think we’ve shed some light for people on an industry that people just don’t really understand it because it is quite complex. So, it’s been really good.
Again, guys, go and get that free checklist. Head to onproperty.com.au/pumped. And until next time, stay positive.`