Fear…our own worst enemy

When I explain to people what I do and how I’ve made a business out of what I love – developing property - they often say “I wish I could do something like that.”

My reply is always "you can do it. If I can do it, you can do it." What I've worked our over time is the difference between someone who fails and some who succeeds is the courage to act, not just once, but repeatedly.

Something else I’m often asked is when is the right time to invest in property?  In my books, the right time is now.  I’ve seen so many people over analysis the market and end up sitting on the side lines for years because they’ve lacked the confidence to take action and invest. Then they look back and say “if only I did buy that property back then...”   I’m not recommending you buy any old property, of course you must do your due diligence, but when you’ve ticked the boxes and the deal stacks up, then have the courage to act.

An important element to help us act is to overcome fear. Fear is a powerful emotion and is described in the dictionary as “an unpleasant emotion caused by the awareness of danger or expectation of pain”…which I’m sure we have all felt at some point in our lives. 

Any successful investor will tell you their journey has not all been plain sailing. They have learned to overcome doubt, fear and uncertainty along with recognising the persistent drive to never give up.

To some of us, the thought of failing or making a mistake is traumatic. To others, they seem to be able to pick themselves up and keep going until they make the next mistake only to pick themselves up again. They learn from each mistake and see them as opportunities to improve.  This is the type of resilience needed to enable us to bounce back each time. Is it passed on from parents who have instilled this resilience into their children or is it learned? From my experience, I believe it is learned over time. It’s like anything, if you want to be good you have to practise. Repeat the process time after time and keep refining it. 

As a property development project manages this is exactly what we do. Every development is different, each piece of land brings challenges but we can overcome them easily now because of our experience and yet we are constantly looking at ways to improve our process. 

Whilst reading a blog on the internet, I came across these tips; 9 Steps to Overcome Fear which I’d like to share with you.  As a property developer and business woman I could really relate:    

·         Make the decision to succeed - Once you decide on success you rarely allow doubt to enter your mind. Your persistence, dedication and resilience are strengthened. You free yourself to do the uncommon and the impossible.

·         Take risks – Chase your fear. Do what scares you. Make the dreaded phone call. Ask for what you want. When you experience rejection ask someone else.

·         Be prepared – Anticipate your own needs. Don’t live in fear, create solutions in advance. Know how you will get out, get over, around and through what could go wrong.

·         Let go of urgency and fear – Learn to relax and go with the flow. Our anxiety and stress are caused by living in the pain of the past or the far of the future. Life happens in the present moment.

·         Focus on the benefits of your success – Become focused on what you will gain. Is your benefit financial freedom, travel, saving the lives of others or leaving a legacy you can be proud of? When the going gets tough, focus on your why?

·         Calm your body – Find a quiet place and bring attention inward, notice where your fear resides in your body. Learn to calm and centre yourself.

·         Create your own fan base – Your family and friends will be supporting you to succeed. When you are scared, imagine them all cheering you on.

·         Participate in life – Turn off your television, electronics and the negative media. Take a guitar lesson, a skydiving or yoga lesson or swim in the ocean to basically feel good.

·         You are enough – Accept who you are and where you are today. When you compare yourself to others, you create your own suffering.

When thinking about developing property, the whole process can be daunting. Stay focussed on the end result, make sure you take action and move toward your goal by taking one step at a time.

www.propertybloom.com.au

Tips from www.zenhabits.net

Walking the fine line

As part of our property development project management process, after locating a suitable development site, we’ll then recommend to clients the type of design of villas that the development requires.  This is very important because there is a fine line between building for the market and over capitalising.

We look at four things to determine the level of building investment required:

-         Demographics for the suburb

-         Surrounding properties to the site

-         Tenant demand in the area

-         Recent sales references in the suburb

Today I looked at a dual occupancy site in a suburb that had a couple of different demographics; young families with one or two kids attending the local private school and retirees looking to downsize and live close to shopping facilities in low maintenance properties.

I’d been given a build cost based on what had been built in this estate to date. It is an upmarket estate.  The build cost for a three bedroom, two bathroom duplex to the standard that had already been built in the suburb was around $400,000.

I knew we could build a similar duplex, slightly smaller without a walk in robe to the master (that the other duplexes have) for about $370,000.   There were other small differences to the façade and finishes but were they worth the difference of $30,000?  My take on it...nup, because tenant demand is high and we could get the same rent as the other, slightly ‘better’ villas in the area.

A few years ago, I build some fabulous duplexes in an upmarket estate in the Lower Hunter Region of NSW.  I wanted to build something of a standard above what was being offered in this estate. So I had the duplex architecturally designed with asymmetrical roof lines in lieu of a pitched roof and we included upgrades such as rendered external finish instead of brick, stone kitchen and vanity benches, shadow line finish to living areas, upgraded European appliances and smart looking column fencing with aluminium slats.  I thought when the bank values these villas they will see that they are higher in standard than the past sales references of 3 bed, 2 bathroom villas in the area. 

Wrong.  The valuer looked at past sales of 3 bed, 2 bath attached villas and valued them at the same level.  The upgrades we’d included were not seen to be substantial enough, but of course they did add to the build cost.  A few years later the client decided to sell one of the villas, he was convinced by a local agent that the price was acceptable for 3 bed, 2 bathroom villas as that was what they had sold for before.   I’m sure if the client had ‘sold’ the property to the agent, meaning he needed to emphasis all the points of difference that his villa had to the others, he may have sold at a higher price (mind you, a good agent would pick up on these ‘selling points’) but he didn’t and so his more upmarket villa did sell at the same price as the stock standard ones.

So now I’m faced with the opposite opportunity. Can we build slightly below what is in the market, save on costs but end up with the same value on completion?   I reckon we can. Being a bit of a city slicker, I’d always thought higher cost means higher quality.  But I also have a ‘value for money’ vein running through me.  I ran the numbers and our client is looking at making an additional $30k or so in equity out of this project for not much concession.

As a property developer, I think this can sometimes be a better option.  Look to build slightly below the market than the other way around.  But this is based on this particular location in a large regional country area.  It may be different in capital cities. My message today;  walk the fine line well and you could make more than if you pay for the fine upgrades.

www.propertybloom.com.au

Reading between the lines of your pest & building report

As part of our process, once we’ve located a suitable development site and if there’s an existing house on the land, is to order a pest & building inspection. Management of the renovation is part of the development process.  But to what degree do you renovate and when is it considered over capitalising?  In these regional areas, we are not looking to massively upgrade a house but to add cost effective value and maximise rental returns.

It’s crucial that we receive the pest & building report before our client exchanges on the property, so we always make our offers “subject to a pest & building report”.

When the report arrives, it’s usually around 30 pages long and for first time readers, can completely shock and turn them off a property. The report contains a lot of information that the inspector needs to explain and also to include in order to ‘cover’ himself.  It’s his job to point out all the things wrong with the house, but then it’s our job to sift through the data and explain to our clients what we believe to be acceptable or common in houses in this particular area and of this particular age.

Property Bloom has renovated many houses and we have picked up some common problems that may sound a bit scary but can be quite cost effectively solved.  Most of the houses that fall into the right price range – so that the numbers stack up to develop – would be over 50 years old.

And these properties do have defects, depending on the age and the general maintenance they’ve experienced, however the property usually still represent good value.

I thought it would be interesting to translate some comments we often find in the building report that can raise alarm bells. In our experience these ‘defects’ are actually are not too hard to fix by using cost effective renovation strategies.

Defect:  Various downpipes discharge rain water to ground and require connecting to storm water pipes or storage tanks.

Translation: a plumber can cost effectively connect down pipes to the stormwater for approximately $800.

Defect:  The external painting and finishes reflect an inadequate maintenance program and will require extensive preparation, detailing and painting to ensure long term qualities.

Translation:  most houses can be washed down and may not require painting.  If they do, we can usually have it painted for $2,500.

Defect: Roof mortars require repointing randomly to ensure further long term waterproofing qualities.

Translation:  Pointing is a substance that is used on the roof capping tiles. A quote from a roofer can be quickly obtained however if the roof is not leaking then it may not be required urgently.

Defect: Internal painting is in poor condition and requires professional upgrading.

Translation:  what one person’s ‘poor condition’ is another person’s ‘ok’.  We like to wash down internal walls and ceilings with sugar soap and they usually come up like new. What is acceptable for a tenant may be different to your own standards.  We can internally paint a house for around $2,000 and a new coat of paint does wonders to a house, so it’s worth considering.

Defect:  Asbestos linings were possibly present in some areas.

Translation: Asbestos materials remain serviceable and are considered safe as long as asbestos is not tampered with

Defect: There is sagging to the ceilings.

Translation:  Sagging ceiling are easily identified by the ceiling areas being wavy and not level and can be repaired by a handyman securing ceilings to partitions.

Defect:   There are variations in the floor structure and some bounce.

Translation: over time piers do sink or timber floor joists can deflect or bend.  Piers can be packed to stop some of the bounce and variation. To repair an entire house is usually not necessary but we always ensure the ant caps are on piers.  Bent joists can be replaced if required.

Defect:  Some damage due to wood decay fungi.

Translation:  Wood decay fungus is commonly known as wood rot.  The type of fungi encountered by pest controllers usually reside in poorly ventilated subfloors, below wet areas of the home, exterior timbers and in areas that retain waters in the soils. The durability and type of timbers are factors along with the temperature and environment. Removal of the moisture sources usually alleviates the problem.  Have a carpenter inspect and replace any rotted boards or timbers, most old homes will have some degree of wood rot.

So don’t be put off when reading through reports, if you have any doubts or don’t understand the information then discuss it with your building inspector as often a conversation can explain things in more simple terms.  

If your strategy is to create high yielding property then be careful not to over capitalise when you are renovating.  We base our renovation assessments on what’s required to bring a house up to the market standard and to make the house safe and clean.  Right now we are finding properties where just a few thousand dollars needs to be spent to increase the rent substantially due to the high demand in these town.   Once you’ve completed your house renovation and then go on to add a new dwelling, granny flat or even a duplex, the yield can be dramatically increased and equity can also be created. 

www.propertybloom.com.au