08 May Getting started in property development
In today’s show Nhan Nguyen, from Advanced Property Strategies, gives us some very helpful tips to follow when you are starting out as a developer. Some people probably start out a little bit too soon and they learn their lessons the hard way…
Kevin: I guess one of the progressive steps as you become an investor in property is that you want to get bigger and bigger properties, which probably leads you to becoming a developer in your own right. It seems like a pretty easy step, because you’re learning as you go through. Some people probably move to that developer step a little bit too soon, and they learn their lessons the hard way.
Nhan Nguyen is from Advanced Property Strategies. He specializes not so much in making mistakes, although he’s probably made a couple he might admit to, but he certainly is a very good developer. I’m keen to find out from Nhan what you need to know if you’re going to start out as a developer.
Hi, Nhan. Thanks for your time.
Nhan: Hi, Kevin. Thanks for having me.
Kevin: Any mistakes you’d like to admit to first off or not?
Nhan: Mate, I’ve made hundreds, if not thousands, of mistakes over the last ten or 15 years. Part of being a developer is being open to making mistakes. One of the biggest tips I can say in learning to be a developer is thinking big and starting small, because there’s so much to know.
One of the things that I suppose defines a developer is what you want to develop. There are so many ways of developing, whether you’re doing a removal home, a subdivision or townhouses. One of the things you do need to know, especially when you’re starting out, is the rules, because there are a lot of rules you need to know.
Kevin: Are these rules from councils and things, or just rules that you live by yourself?
Nhan: I’m talking about council rules and regulations. Every suburb has different rules, every council has different rules, and even from street to street, there are rules on whether you can demolish a property or whether you can build to a certain height. Not just rules; there are other physical limiting constraints, such as flooding, overland flow, and pipes in the ground.
It is a bit of a minefield for a budding developer. Yes, there can be a lot of money to be made, but I’d definitely tread with caution, especially when you’re starting out and you don’t know what you don’t know
Kevin: I guess in securing a development site, too, you’d no doubt want to put some due diligence in place. Do you normally try to do your due diligence before you go to contract or after the contract period?
Nhan: Both. Initially, before the contract period, when I’m looking at a property, I might jump online, look at PriceFinder or RP Data, look at various tools there, and do as much research as I can. There’s another tool called Dial Before You Dig, which looks at infrastructure underground, as well as going to the local council website that hopefully will give you as much information about zonings, what you can do, and what you can’t do. For example, if it’s zoned for a shopping center and you want to do a block of units, you may not be able to do that, and vice versa.
Being an area specialist who’s very much high on the criteria, you have to know an area and know it inside-out and upside-down. Also, be open to change, because the council rules change. Every six or 12 months, I reckon, there are various changes. For example, Brisbane city council, on July 1, 2014, made some huge changes to their city plan, as well as other local councils. It’s an ongoing process of changing.
Kevin: I guess one of the other things, too, is you never take things at face value and never accept someone’s word on something. Do your own diligence and find out for yourself. You’ll have no regrets that way.
Nhan: Exactly. That’s where you have to bring in consultants and other engineers, builders, certifiers, and surveyors. When you’re buying – let’s say – a normal investment property, you might do a building and pest; you’d do a check for the rental appraisal; you’d go to the bank and get a valuation. That’s pretty straightforward. Once you go to the next level in development, there’s a whole new team that you need to bring on board, because there are other variables and things that you have to either adhere to or be able to satisfy the council requirements.
Kevin: Yes. They would be too complex for us to go into in this chat; It might be something we’ll follow up on on a later occasion. But I guess the bottom line is if you want to step into being a developer, start the process slowly. What were your words? “Think big and start small.” I think that’s probably where we should leave it for today.
Nhan, I want to thank you so much for your time. Nhan is from Advanced Property Strategies. Thanks, mate.
Nhan: Thanks, Kevin. Thanks for having me.