26 Jun Turning a boarding house into a 20 unit development site. Success Story – Wendy MacDonald
The success story this week is from Wendy MacDonald who calls herself a “developer-grandmother”. Hear how she turned a Brisbane property into a 10 room student accommodation complex and is now developing a 20 unit 5 story complex on the site returning her a whopping $700K plus profit.
Kevin: Wendy MacDonald calls herself a developer grandmother. She lives on the Sunshine Coast in Queensland, works full-time, and completes development projects part-time. She got experience by working for a land developer full-time for five years as a project manager and completing different projects with joint venture partners and investors.
When she came to Australia from New Zealand in 2005, she decided she wanted to become a property developer. In 2007, she bought a property in Mitchelton, which is eight kilometres northwest of Brisbane CBD, and converted the existing house from an eight-room boarding house to a ten-room student accommodation complex. Now, she is currently obtaining a development approval on that site for a 20-unit five-story building.
She joins me today. Hi, Wendy. How are you?
Wendy: Well, thank you.
Kevin: Good. Tell me, Mitchelton: why did you choose that area?
Wendy: At the time I purchased Mitchelton, I’d just been through a divorce and I could have bought a nice freehold apartment, which wouldn’t have made me much money, or I could’ve bought a development site, which I felt would potentially make me lots of money.
Kevin: So that’s pretty much what attracted you to the area? You saw the development potential in it?
Wendy: Yes. I suppose it also met my budget. At the time the Brisbane City Council had announced that there was going to be a number of major regional activity centers in Brisbane, and Mitchelton was one of those. I thought there would be a high likelihood that the site could get rezoned to higher density, and that’s exactly what’s happened.
Kevin: We’ll talk about prices in just a moment, because I’d love to dig a little bit deeper there. In the brief that you gave me, you talk there about strategic sites. Could you tell me what a strategic site is and how you find them?
Wendy: A strategic site to me is any site that’s going to increase in price – because it has development potential or it may be because of its location. I personally don’t buy any property unless it fits into my overall plan and how it’s going to help me achieve my overall goals.
In terms of how you can find them, I suppose the Internet is one way, but in a really hot market, often properties are actually sold before they’re even listed, so being on real estate agents’ databases before they actually market it is one of the ways of being able to connect with real estate agents. The thing is if you have a really good relationship with a real estate agent, they may call you before they actually list it anyway.
Kevin: You obviously had a good relationship with an agent who helped you find this one. Do you find that some agents are really attuned to what developers want and some aren’t?
Wendy: Yes, most definitely, and I think one of the ways to connect in with those agents is really by referrals.
Kevin: Tell me about this particular site in Mitchelton. When you found it, how sure were you that you would be able to redevelop it? In other words, you went in and did your due diligence, but was there any risk attached to that?
Wendy: I think there’s always risk with any type of development, because it’s not until you literally put the bulldozer on the ground that you know what’s underneath the site. Sometimes there can be problems with services, and particularly in the Brisbane City Council with the storm water. If those pipes are not actually in your site, you may need to get your neighbor’s approval to be able to develop a site, and if a neighbor for any reason decides to withhold that approval, you may not be able to develop it.
Kevin: I said in the introduction that you initially converted it to an eight-room boarding house, and now you’ve gone along and got a DA for that. Tell me – because I hear some horror stories about boarding houses because of the types of tenants you get in there – are you managing that yourself?
Wendy: Yes, I do.
Kevin: And that’s not a problem for you at all?
Wendy: Well, when I first moved from New Zealand, one of the things I did to educate myself was to get my full papers to get my real estate licence. So I have a sound understanding of all the council and government regulations around student accommodation or boarding houses. I think it’s vitally critical to keep on top of it.
The first thing is that you need to have a fully compliant fire safety management plan. I have house rules. All my tenants are on REIT leases, all my tenants pay bonds, and I absolutely keep on top of the situation.
Kevin: Well done; that’s good. I want to dig a little bit deeper into prices now. Tell me what you initially paid for the site, what it cost you to convert it, and what you think will be your end result now that you look like getting a DA approval.
Wendy: I paid $700,000 in 2007, and I suppose I expect to double my money at least.
Kevin: That’s double to $1.5 million or thereabouts. Are you going to sell it with the DA, or will you develop it yourself?
Wendy: At this stage, I’ll probably sell it with the DA, but I’ll certainly review that situation when I get that. When a site is sold, it’s always sold on yield. The end price depends on the number of units. That’s why it’s so important to be able to get a really effective design on the site so that you can get the most number of units. But you also need to be able to design something that’s going to be easy to build for any builder or developer who comes along.
Kevin: It’s a five-story building – 20 units, as I understand it. What stage are you at now with the DA approval?
Wendy: I’ve spent quite a number of months finalizing the design, and the key for me has actually been getting the rubbish off-site, interestingly. Until I’ve been able to solve the issue of having a rubbish truck come onto the site, turn around, and be able to leave in a forward motion, I haven’t known how much space it would take up.
I had to know how much space the rubbish truck would take up to work out how much space I have left for parking, and once I know how much for parking, I know how many car parks I can have. Once I know how many car parks, I can know how many units I can have, and then I can work out what the final price is, or the potential selling price.
Kevin: We’re looking at 20 units. It’s a site valuation, so you’re looking at probably $70,000 per unit site. Is that the going figure now?
Wendy: I would say $70,000 to $80,000, and I think that’s going to depend on the market at the time, what else is available in the market, and what else is being built in the area.
Kevin: Just before I let you go, Wendy, it’s a great story, and I really would appreciate you telling anyone who is listening to this who probably wants to go in a similar situation like you and get into some kind of development, what are your major tips to help them get along that path?
Wendy: I think if anybody wants to get involved in development, really, they need to first of all decide to take control of their financial destiny and set some goals, and they should be written goals. I think they then need to develop a plan of action or a strategy for how they’re going to get there, and they need to create a team, because development is very much a team sport. By the team, I mean tradies, consultants, professionals such as lawyers and accountants, and people like myself who offer coaching and mentoring services to help people.
Kevin: How can anyone who wants to get in touch with you do that?
Wendy: I have a site called PropertySuperstars.com.au. On my site, I’ve actually set up a blog so people can watch my development journey, and I’m very happy to share my learnings and my tips along the way.
Kevin: Of course, we contacted Wendy through a great association we have with Matt Jones, who runs a meet-up group, as well.
Wendy: Yes, that’s right. I think the meet-up groups are invaluable for meeting others who are either potential investors, or they could be clients, or in my case, some of the people I’ve met at the meet-up group have become friends.
Kevin: Wonderful stuff. Have a look for it. Just Google Matt Jones, and you’ll find it. If you want contact Wendy directly, you can do that through her website, PropertySuperstars.com.au.
Great talking to you, Wendy. All the best with your future, and thank you so much for your time.
Wendy: Thank you so much to you, Kevin.