Property Hub - Investment Insights & Inspiration - Get Invested: Hayden Warren on the backyard gold mine, building wealth through supply

Starting point is 00:00:00 Welcome, Fred and Fighters. What if your next big property opportunity isn't another shiny suburb, another hot tip or another headline screaming boom or bust like a drunk seagull fighting over a chip? What if the real opportunity is already sitting under your feet? Your block, your backyard, your existing property. Or a site that most investors drive past without realizing what it could become because the rules of property investing have changed. After the latest federal budget, property tax changes, we're seeing a clear shift favouring strategies that add new housing supply, particularly qualifying new builds. And that means that the old investor question of what should I buy next needs to evolve into what can this property become. Can it be sub-divided? Can it carry a

Starting point is 00:00:49 second dwelling? Can you build one, sell one, keep one? Or in the right situation, could you potentially keep both? Now, that sounds exciting. But this is where, we need to separate the real gold dust from the high-vis fairy stuff. Because today's guest, Hayden Warren, doesn't just talk about finding properties. He talks about engineering outcomes through the right sequence. Buying well, keeping the existing dwelling, adding a new one, creating a separate title, managing the risk, managing the build, and in some cases, helping investors recover capital on completion so they can move on to the next opportunity.

Starting point is 00:01:30 But before you run outside with a bunnings tape measure a high-vis vest and a dangerous amount of confidence, let's be clear. Small development can create powerful outcomes. But done badly, it can chew through your cash flow, your sleep, your sanity and your marriage faster than a labrower chowing down on your sausage roll. So today's episode sits in our AFA approach stage

Starting point is 00:01:53 of my property wealth clock, which is your strategy GPS stage. The stage where you ask, what pathway actually gets me from where I am now to where I want to be. And in this episode, Hayden and I unpack why current market fear, soft sentiment, rising costs, and the push towards new supply may actually be creating a contrarian opportunity for disciplined investors who know what they're doing.

Starting point is 00:02:19 We'll explore who the strategy suits, who should run a mile, how capital recycling can work in the real world, why one deposit two titles can be powerful when the number, numbers back up and when it's just a shiny spreadsheet with a shovel attached. So are some investors sitting on hidden property gold? Can adding supply become a smarter wealth strategy? And how do you avoid turning your back-out dream into a financial demolition burby? Well, let's find out on the inside. So let's get invested. Welcome to get invested on the Property Hub podcast channel, the leading weekly show for Australians who want to learn how to unlock their full self, health and

Starting point is 00:02:58 wealth potential. I'm your host, Bushy Martin, and each week I go deep with the best investors, experts, leaders and founders to find out what it takes to break free from the grind, discover freedom and to live by design. Subscribe now and join me and get invested in the life that you really want. Let's get started. Now before we begin, last week, I asked you to picture two very different roads. This week, picture two finished lines. The first, as Bondi. By the time you hear this on Saturday morning, our great-mate Eddie, the Frenchman on the run, should be within the final 48 hours of reaching Bondi Beach. Behind him, 563 days of preparation, more than 40 days on Australian roads, and nearly 4,000 kilometres

Starting point is 00:03:48 of bitchmen, blisters and brutal self-discovery. His ankles beyond sore, his skin's red-roar, his body and mind are beyond exhausted. Yet, still, every morning he gets up at the crack of dawn, laces his battered shoes and asks his body for yet another 100Ks a day. That's what true sustainable success looks like. Not one heroic burst, but one purposeful step repeated when every part of you is screaming for you to stop. That never-say-dye commitment separates the best from the rest,

Starting point is 00:04:26 and investing in business and in life. But there's a second finish line. As I recall this, Eddie's raised just over 72 grand of his $1 million donation goal for Red Kite to help kids with cancer. So his distance gaps have almost closed, but our donation gap hasn't. Now imagine it's your child who's been diagnosed with cancer. Your work may have to stop, but your bills don't.

Starting point is 00:04:54 Your car still needs fuel to reach the hospital. hospital. Food still needs to reach your table. Your lights have got to stay on. And somehow, you need to steady your frightened loved one, support your other kids, and hold yourself together when your world is all but falling apart. And that's where Red Kite steps in. Eddie would tell you his chosen suffering can't compare with what these families endure. And that's exactly why he keeps choosing it. Eddie can stop, but those families can't. They just can't step off their road. And Eddie's carried their cause across our entire continent,

Starting point is 00:05:32 but he can't carry the million dollars a line. So this final leg belongs to us. So donate just 10 bucks. Share Eddie's story with a friend and ask them to donate 10 bucks and share it with someone else so that we keep the baton moving and the ripples of hope spreading. $100,000 is giving 10 bucks each becomes $1 million. So if get invested has ever helped you, please pay this value forward now.

Starting point is 00:06:00 Donate through the link in the show notes or at Frenchmanontheron.com. If money's tight, spend your reach. Like and follow at Frenchman on the run, share his final post and leave him a message that's going to inspire him for his final kilometres. Because Eddie's feet may stop at Bondi on Sunday or Monday, but our generosity must accelerate now. So take a minute, click the link and do the right thing for others in desperate need, and I thank you for your support. Hi, Frida Fighters. Now let me paint you a bit of a picture. You're standing in your backyard with a coffee in hand, you're looking at a patch of grass,

Starting point is 00:06:38 a tight old shed, a clothesline, maybe a lemon tree that produces three aerobic lemons a year, and you think, well, that's just my backyard. But someone else walks past with a very different lens, not a magic wand, not a gold detector from a late-night infomercial, but a proper planning lens, a feasibility lens, and a suitability lens, as well as supply. And they don't just see grass. They see access, they see setbacks, frontage services, scarcity, and they see a possible second dwelling. They see a future title and they see options. And in property, options create oxygen, because most investors only see what a property is. But the better investors start asking,

Starting point is 00:07:25 what could this property become? And that question is becoming more important now than ever. Because the federal government's latest property tax direction now favours qualifying new bills and additional housing supply, which means we're entering a very different phase of property investing. A phase where simply buying what already exists may not always be enough. A phase where investors

Starting point is 00:07:51 who can help out supply, manufacture value and create more housing may have a growing strategic edge. But, and this is a big butt, not a Kardashian-sized part, but still one that's well worth paying attention to. This doesn't mean that everyone should become a developer

Starting point is 00:08:09 because there's a fine line between a smart supply adding strategy and a financial face plant with council forms attached. Just because a site can be subdivided doesn't mean it should be. Just because the builder says, yeah, mate, no worries, doesn't mean there'll be no worries. And just because a spreadsheet says you're going to make money doesn't mean the market, the bank, the council, the builder or the weather, has registered your spreadsheet.

Starting point is 00:08:35 So today's conversation isn't a hype session. It's an opportunity check. It's a risk check. And it's a suitability check. And it's a chance to separate the real gold from the high-vis very. dust. And that's why I'm really looking forward to today's chat. Our expert guest is Hayden Warren from Golden Necks property and he's built a business around finding properties with hidden development potential and helping investors navigate the messy middle between idea and outcome.

Starting point is 00:09:03 He's not just looking at what to buy. He's looking at what can be created, what can be added, what can be improved and where the risks need to be managed before they manage you. So welcome and let's get invested, Hayden. Awesome. Thank you so much, Bushie. I'm happy to be here. Looking forward to this for a while. I know we've sort of been like ships in the night a little bit with our schedules over time, but this is a very timely discussion today. So, and I'm really looking forward to sort of lifting the bonnet and helping our audience see what may be possible, what can go wrong, how to tell the difference.

Starting point is 00:09:37 Before they end up wandering into their backyard where they're a bunnings tape measure, a high-vis vest and a dangerous amount of confidence on all this, mate. But before we start digging for backyard gold, let's start by giving us a bit of a lay of your land because you're not operating as a standard buyer's agent and this is where I really want to kick off the episode. So for those who haven't come across you before, what do you do differently and why? So the niche that we've kind of carved out for ourselves here is basically specialising in retain and build subdivisions. And what that means simply is you're buying a property that hasn't existed. dwelling on it and there's enough land where you can subdivide and build another dwelling at the

Starting point is 00:10:18 back. We've been doing this for coming on three years now and the strategy has all the fundamentals. So although we are massively benefiting from these budget changes and maybe one of the only strategies that is, it always was the case that this was the correct way to go forward. You know, my first properties I bought two in 2019. It was the first year I started investing and one was a townhouse, another one was a house, there was no kind of potential beyond a granny flat. We've really kind of moved away from that. And what I'm seeing from a lot of people is they want to be more proactive. And being able to set your watch to a timeline of when you're going to have a project

Starting point is 00:10:56 finished and a result that you're going to get from that project seems really appealing to people. And like you said, now more than ever. Yeah, totally. Yeah, well said. So before we get too deep into the nitty gritties of subdivision setbacks, site coverage, and I really want to understand the you behind your process. So, you know, because your story isn't the standard.

Starting point is 00:11:18 Woke up one day, bought a duplacus and then become a buyer's agent tale that I see a lot of on podcasts. And you've actually shared with me in our run-up to today that you grew up on Hong Kong and Shanghai around ultra wealth and then returned to Oz, worked as a sailing instructor and then moved into real estate. So how is all of that background shaped the way you think about money, risk and ambition, man? You know, I've made my mistakes being a real estate agent. I got carried away with all the typical things that real estate agents do. But as a broader scope of the idea of wealth is basically to think big, you know, growing up particularly in Shanghai around, you know, 2012, 2014, watching a city, you know, literally day by day just expand was incredible.

Starting point is 00:12:05 Whether I was conscious of what I was kind of taking in at the time. I'm not really sure, but even with Hong Kong, you know, just such a sprawling city, you're always seeing construction and, you know, being interested in how far you could push things and whatever that was. You know, I was also actually did a year as a forward swap broker in the financial markets and that kind of, after a year I could tell I wasn't going to get me where I wanted to go. And, you know, I went into selling real estate after that and ultimately that didn't get me where I wanted to go and now we're here. So I think being around particularly people that are, you know, or areas that are big expat communities,

Starting point is 00:12:44 you see people changing and chopping all the time. So I've never really been afraid to kind of, you know, give something a crack. Don't get me wrong, it's scary, but it's nothing I've really shied away from. And, you know, the first kind of six months of moving from selling to buying, I was basically just a standard buyer's agent, not that there's anything wrong with that. but what I found is we were getting people and clients that kind of had their idea or what they thought a good investment was. And it was very much a, you know, execute on their idea whether you think it's good or not

Starting point is 00:13:18 or, you know, potentially lose the business. You know, I've spent my fair share of time explaining to people, you know, why I think things aren't a good idea, but, you know, you can lead a horse to water effectively. So we were starting to do these retaining builds in Perth three years ago. I was actually doing it for my brother and for for for for for for for for for for for for for for you've spoken to. And it was a conversation with a client who asked me. He's like, you know, what are you doing in property?

Starting point is 00:13:47 What's different? Blah, blah. And I basically explained it to him. And to this day, the feasibility that we use is actually the one that we were using from day dots just got a few extra things for clients. And I explained to him this idea that, you know, we were looking at basically, you know, ingesting capital into the project. And you know, if we were.

Starting point is 00:14:05 on today's numbers, able to snap our fingers, spend all the money, construction, out of construction, you know, the purchase of the property, stamp duty, all of our capitalized holding costs, that we could get that new property at the back, be in a positive equity position, which meant that we were still able to take out the capital that we put in, which leaves us in a scenario, whereas if I can keep finding deals of that size, we can effectively infinitely do this. Now, the caveat to that is obviously servicing, and, you know, with correct structures, you know, it's changed a bit these days. that effectively is true.

Starting point is 00:14:37 And for many years, we had quite a few clients that joined us on that journey when we were operating in Perth. And we always operated off that initial scenario of, okay, our worst case scenario, no growth, all the fat in the timing and the cost. We got this new house, we sell the old one, and that leaves us in a position where we got a capital back. What ended up happening was very, very different. Of the first nine that I did for clients in Perth, no one's actually sold the old process. property because of the cash flow over both of them. And we're in this scenario where we have the beauty of going, okay, is that still a market that's appreciating? Yes or no, you know, what do we want to do with it? Is there a potential for rental increases still if there isn't capital increases,

Starting point is 00:15:19 yes or no? And then the third one being, can we move on to the next projects whilst retaining or do we need to sell one? We're always looking to keep the new one. There's a bunch of reasons for that, GST implications and whatnot. And all nine of those clients, we've already moved on and we're halfway through sites in Victoria. So we'll be wrapping those up, you know, probably early next year, maybe end of this year, depending on kind of what goes through. So, you know, we've proven the model. And it's just really exciting to be able to sit there and go, you know, we've got an end date on this.

Starting point is 00:15:51 We thought we were going to be in this position and holy crap, we've got a 3x multiplier on the back end of that. And the important thing that I think is we're getting those results and we're keeping a property. So we're building a portfolio of brand new houses that are cat flowing, making money, getting our money back and moving on to the next site. So we're not losing opportunity cost. And, you know, I couldn't be happier with how it's going. Even halfway through a lot of our VIX stuff, you know, we're starting to get our bank vows back. And, you know, it seems like they're going the same way, which is great.

Starting point is 00:16:25 Love it. Well, I'm going to circle back to the, you know, taking the capital back on in detail a bit later on that. conversation but I guess sort of before we sort of move away from your own background and given clearly what I love about what you share with us is you're prepared to have a crack you don't put yourself on a box and then paint yourself in a corner you you look at where the opportunities and prepare to take it in and have a go of that but I'd love for you to sort of pull out of that that experience with you know rubbing shoulders of the ultra wealth being a sailing instructor moving into real estate what are the lessons that you pulled out of all of those that are really

Starting point is 00:17:01 useful to what you're doing now and how are you helping investors move forward you know for me i don't really think there could be a better job than being a sailing instructor maybe a dive instructor or being a top gear presenter but i remember um so i sailing i was a sailing instructor in in hongong and when i first moved back here i remember being a middle harbor and i was on the little uh you know inflatable speedboats and i was i think i was teaching oppes at the time or it might have been redlands lasers and uh i just kind of worked out as much as I loved it, I was never going to be the person that owned the boat doing this. Probably would get to sail lots of other people.

Starting point is 00:17:37 So it became about a way of, well, how can we make lots of wealth to the point where not only can you buy the boat, but then you can go and enjoy it. And then, you know, doing a year in the financial markets, that wasn't really teaching me a way to, sure, buy the boat, but then the time to enjoy it. And then moving into real estate, the same lesson applied. You know, I remember some years that were terrible. I think it was the Royal Commission. You know, overnight when the loans dried up, we went from, you know, 15, 17 listings,

Starting point is 00:18:08 which is pretty normal to us, to over 30. Maybe we were running open homes on Saturday, Sundays. I did seven days for a year straight at one point, but quite regularly just working, you know, all the time. And quite frankly, it put me in some bad habits to justify the amount I was working, you know, just buying stuff that didn't matter and stuff that, you know, ultimately would have been put to better use. investing in property. Yeah, the old lifestyle inflation exercise.

Starting point is 00:18:34 Yeah, I love that. Well, I want to zoom out a bit now because this is not just about one block, one backyard and one clever strategy because the bigger picture itself in the property game is it's clearly changing. Investors need to understand whether they're still playing by the old rule book.

Starting point is 00:18:51 So I love your thoughts on whether the old buy-well and weight model is still enough on its own and why more investors now need to look beyond the traditional buying holders in the experience as you see it? Yeah, it's, you know, there's a lot of nuance to this because ultimately it comes down to are you purchasing it, you know, let's say it's in your name, you can't gear it, so then to hold it without needing to shell out lots of money on your holding cost, then you're taking quite a low LVR. So you're pumping quite a lot of cash into a deal to make it neutrally positive, to hold it easier and then wait.

Starting point is 00:19:27 well, you know, if you're taking a $250,000, you know, chunk of cash and putting it into a $500,000 property just to hold it and wait, you just could have been doing something better with it, i.e., you know, finding a property, you could cut the back garden out of and build a proper house. So the process kind of comes from, you know, okay, what if we bought the house and then we subdivided the land off? Well, what if we actually ended up building the house on that land instead of just taking it to subdivision? So you can take that all the way back to should I just buy and hold? Well, particularly, now, what does that look like? Whether you're in a structure or you're in your name, it's the same process because of these changes. And ultimately, you know, because of the changes, if you're buying a property that isn't new, you don't have the negative cash flow, when you're selling it, you're selling it to the same person. It's like the example, like I've had clients with like, oh, you know, you're getting married. I want to use my first time home buyers grant. There's a $400,000 studio in Sydney. I could just scrape together the money to get into that. And I go, what makes you think that when you sell it in five years, you're not going to be selling to someone that's just

Starting point is 00:20:27 scraping it together. And we go into the philosophy of what we create and what we build in what buyer pool that opens you up to. So if you're all buying something that is, you know, not good cash flow and you're having to put a lot of money into it, if the rules don't change, that's the, that's the person you're going to be selling it to. So they're not going to be sitting there go, yeah, let's throw loads of money overmarket at it. Yeah. Yeah. Now, that's spot on. Well, you know, as you've already touched on, the strategy you're pursuing, It's been good for a long time, for those who are smart enough to recognise it, but it's now become more timely and great awareness around it because of the budget changes

Starting point is 00:21:06 that are nudging investors towards the new build fraternity. So the old backyard gold detectors is starting to get a lot more attention, which is useful, but also dangerous if people must take a bit of a policy incentive for a fully formed strategy. So in the context of the recent property tax changes, where new builds, do get the favorable treatment. How do you think that changes the strategy conversation for investors that they need to be thinking about? There's benefits to new builds, but then you also have higher CGT implications now. So this brings us back to, well, why don't we just knock it over and build two,

Starting point is 00:21:40 or three, or four, which is the maximum development potential of a lot of these blocks. And it becomes a way where you can play with, you know, GST and CGT implications by leaving an existing dwelling, which doesn't have GST when you sell it. And, keeping an old one, which if we look at how the CGT works now, which is after inflation, you're actually incentivized to hold it longer despite, you know, the changes being to allow more supply, let alone that, you know, I don't know if we want to timestamp this. You know, Bathlet's just gone into administration. I have my own opinions on them anyway. I sold lots of their houses back in the day. And then we actually refused to sell them

Starting point is 00:22:19 anymore. So, you know, whether that's a bad thing or not as a bill quality, that's one question. but it's going to leave a lot of people high and dry. But there's going to be, you know, there's murmurings of quite a few other builders, big builders, that are going to reduce their footprint of what they're actually doing. And, you know, I dare say that may be because if you are knocking down your house to rebuild one and that doesn't have a negative gearing implication, well, then they might be losing a lot of that business.

Starting point is 00:22:44 So these changes are, they're very difficult. They're very complicated. So, you know, call it luck, whatever. you know, we've, we've looked at the changes. It's gone great. Awesome. We're going to keep doing what we're doing. And just like buying in the right area, I truly believe it's because the strategy, just fundamentally, it's a good strategy. It has all the fundamentals. It's like there's, you know, people, people getting burnt on property right now in terms of values. And I think they probably have to ask themselves, you know, did they buy in somewhere that was overhyped? Did it have the fundamentals when they got in? Because, you know, there's a lot of, you know, Sydney's going back 20%. Okay, is that Volclus or Penrith? Are we talking about manly or are we talking about the Shire? Like, there's a lot of big averages being thrown around.

Starting point is 00:23:36 It does my head in, Hayden. My belief is there is no such thing as a property market because every property in every street and every suburbs, different to every other one around the country. So we're not dealing with like-for-like apples for apples commodities. We're dealing with unique pieces of art that we ought, we can have a lot of influence on if we want to. So I think, though, the scary headline stuff,

Starting point is 00:24:01 it makes for good news reading to keep people nervous while they're looking at it. And I guess just focusing down on the current conditions where we're seeing poor buyer sentiment as a result of the media, essentially. And as a result, we're seeing some softening values, some, you know, we're in the rising rate cycle. We're seeing the reduced buying capacity comes from our, and then potentially given the interest around building, there's potentially high building costs, high holding costs,

Starting point is 00:24:29 and the policy push as well towards the new build exercise as it's happening right now. So given that exercise where we're starting to see, you know, more investors seduced by the shiny idea before they've checked whether the site's actually carrying gold or just carrying a bit of glitter from the kids covered, when you say that some investors may be sitting on hidden gold, what are the practical signs that a home or investment property

Starting point is 00:24:59 may have genuine development potential, do you think? The first one is to be zoning. I mean, just from a big umbrella standpoint, it was like, what's your zoning? And there's different things to consider, right? If you have a block of land and you have zoning, it's going to be much easier to work out what you can build. When you're looking at a scenario where you're wanting to retain an existing structure,

Starting point is 00:25:20 That's where the actual position of the home is then going to have to relate to what your minimum lot sizes are, you know, what your side access, your setbacks are, private open space, turning circles, things like that. So, you know, the first thing to do would just jump on lands and titles. WA has a really good online portal. Most states have really good online portals and find out what your zoning is. That would be number one. Yep. Yep. No, that's good.

Starting point is 00:25:49 And we'll dig into some of the other bits and places as we go through. If someone's starting to think about this, what should they check first before they start spending serious money then, apart from the zoning? So I actually had this conversation with someone where they were looking at a property. They already owned. They wanted to do something. And, you know, he was like, oh, I've gone and got surveys done

Starting point is 00:26:13 to see if something's possible. You really don't need surveys. Look up what your site access requirement is. But like I said, your setbacks, not just your front setback, you know, on older homes, they typically will change to be shorter. So you can actually build closer. Again, if you're retaining a property, that doesn't matter. But, you know, that front setbacks can matter. What's your off-street parking requirement covered, non-covered per bedroom?

Starting point is 00:26:37 You know, they change all the time. But then, you know, beyond checking your rear side front setbacks, and obviously off the back of zoning, it would then become once you, once you dive into all of those, what you're really looking at is what's my build envelope, and then you can start to look at percentages, you know, soft and hard covers. But, you know, after that kind of stuff, which I kind of would lump all together, it would be looking at how you're going to service the property or even beyond that, you know, what restrictions around services that are already there or easements. And again, you know, despite what people will tell you, that could be a zero dollar activity. You bought a property, you have a contract of sale. Sometimes you got to go back

Starting point is 00:27:17 through DPs that were hand drawn in the 60s. And, you know, you can always tell when they're from the 60s because it'll be like, oh, 78 frontage. You go, I don't have 78 meters. And you go, yeah, that's because it was in feet. So, you know, yeah, you get a bit of a history lesson as you go back. But that will show you things like, do you have easements? You know, if you want to dig into it, then you can start to look at when those easements were put in place and then where the council actually allow you to encroach on those. The easiest ones would then be going, okay, where's my sewer running?

Starting point is 00:27:47 is it running through the back, you know, is it a standard meter off the rear boundary? Is it 1.3? And then from that, you know, again, we've got GPTs, we've got cords now. You can put it in there or you can just Google this. Work out what your setback from that easement is because your rear setback is going to be null and void if there's a sewer line 1.3 in that you have to be one off. So, you know, that example isn't actually so much of an issue because when you think about what you're going to build, you're going to put the back garden there.

Starting point is 00:28:16 So then you just need to go, okay, well, what do I want to fit in there? For me, I only want to build four two-toes. I don't do anything less than that, particularly in the markets that we're in. We don't even do double stories. And that, you know, brings me on to what we would call like the financial viability or feasibilities. You need to know what your end values are and what your cost is on these things. And, you know, there's no way around it if you're going to do it. It's going to involve a lot of calls, a lot of waiting for calls back from builders.

Starting point is 00:28:44 it's going to involve a lot of conversations and that's really kind of the only way to do it. There's only so far that your computer can take you. It requires sitting down with builders. And then in my position, luckily the volume that we do we're able to actually negotiate things that I think a lot of people think aren't negotiable,

Starting point is 00:29:07 which is awesome for everyone that we work with and myself, obviously. Yeah, well, everything's negotiable. in my view when it comes to property, it's just that a lot of people are conditioned to think otherwise. We'll drill back into some of those stuff. I guess just to set the context for those that are listening in that, and they haven't really delved into this world too much, help us to define what makes a good investment property as opposed to a good development opportunity.

Starting point is 00:29:34 Can you sort of help us frame that so that people are starting to see this through the right lens? I don't think there's any difference. So when we're looking at, and I'll use the example of the retainer bills that we're buying to narrow this down a little bit, although it's going to be too vague. You know, if I have someone that doesn't know anything but they want to invest in property, what we'll generally run them through is, okay, in residential property, there's kind of like two ways and there's a sneaky third one to look at when you're investing. This is, are you interested in something that is more of a cash flow play? What does that mean? That means that my outgoings are lower than the rent that is incoming. Yeah, pretty standard. What does that mean? Typically, it means that you're going to have a very high floor space ratio to the land because you can't rent out the land as much as you can as internal space. And that's why you end up with things like townhouses or, you know, apartments. I'm not really a fan, but sometimes apartments. And, you know, that's a trade off. So when we go, okay, what, what's the other option? Oh, my interest is in capital appreciation. Okay, well, they're not making any more land. So generally your land,

Starting point is 00:30:41 is what you're going to be after. And we'll steer away from, you know, what's the condition of the property? Can I actually add value there? But that's going to come with a generally a worse off cash flow. And it's not that one is good or bad. It's we are choosing to take on a pro or a con based on our brief. It's like, what suits you? Because at the end of the day, behind all of this real estate talk and kind of any investing we do is it's the human element. Like, what's good for you in your scenario. And I'll, I'll give you an example, because this is, this is very relevant. I had a client a couple of years ago, we were looking at executing on a Perth development. And like at the last moment, he was signed up. And he said, hey, man, you know, I had chat with

Starting point is 00:31:24 the wife and we actually really just want to focus on our PPR and smashing that mortgage down. And he's like, you know, like, really sorry, didn't want to waste your time. And I was like, oh, no, that's, that's all good. That's, I've got something for us. And he's like, well, you know, like, not really interested in the townhouse stuff like, because, because you told me about all this development, so I kind of, I do want to go down that route. And I go, well, it's not as good. But I'll tell you what we're going to do. We're going to go to Townsville.

Starting point is 00:31:47 We're going to buy a property on 600 square meters that's cash flowing. On the 9th of September, I'm flying up there for our granny flat in store. And then once the lease is up on the main house, we're going to cut the stumps out, raise it to legal height underneath. And then we're going to create three dwellings on one title. So we're halfway through that process now. And that still goes back to forcing value in. into the land value. But the reason why I'm saying that there's no difference in a good development property and a good investment property is the third option, if you have the land to do a granite,

Starting point is 00:32:20 granite flat less so, but particularly subdivision potential, is for clients where, you know, recently SMSFs wrapped up, we did a bunch of SMSF purchases before that window closed. We're still looking for properties that have that potential because what gets you above market average growth is above average returns. You have a property that could be subdivided and could be made money from. So if you don't do it, someone else will see that. So rather than buying something that's 600 square meters

Starting point is 00:32:47 in a zoning that can't be subdivided, do you think someone would pay more for the Apple for Apple's property in a zoning that can be subdivided? It's really kind of that simple. You know, all of this stuff is just logic. And I think people try a bit too hard. Yes, I think the common sense that one gets left out often. And, you know, I'd like to circle back to a comment you made earlier,

Starting point is 00:33:09 but you focus on 4-2-2s and single-level. I mean, that's the lowest cost. But it's also the sweet spot in terms of if you look generally, it does vary a little bit around the country by location, but the 4-2-2 has the optionality and the adaptability to pretty much appeal to anyone. Is that why you're focusing on that profile, or are there other reasons behind that?

Starting point is 00:33:31 It's probably the biggest reason, but we, the pricing basically to do a double story, we said no to because we couldn't see it at the time. And the way that we're working on is we're not accounting for any growth in, you know, in our projects, we're actually generally using three bedroom sales because no one's building four betters. So our feasibility is so conservative, we can't really justify it. And now we've seen it a couple of times. Those double stories just don't sell. And this is where it's like, just put the logic hat on.

Starting point is 00:34:03 And you know, you don't need to be a real estate agent, but this is where my experience comes from is, you know, if you do it for a few years and you sell a decent amount of homes, you know what buyer is going to buy what before you're listed or as you're listing it. So the example I always use is like a three bedroom townhouse, double story. It's like generally it's going to be a younger couple or it's going to be someone that is, you know, maybe has a younger kid and they're going to have to move. But to your point, who can buy a 422? It could be a downsizer if you're if you've done your fees. usability right and you're in an affordability scale where first-time home buyers can buy it a couple could buy it you can have downsizes you can have absolutely anyone and that's what we want to do that's what we we want to open ourselves up to the most buyers of our product and the cool thing about that is

Starting point is 00:34:49 you don't need to sell the house to reap those rewards because when you get bank valuations for the purposes of refinancing those are the products that those valuations are going to have to be used from and if you're building them in areas that are, say, you know, lower prices, but there's no forebettas in your suburb, well, the bank's going to have to go and get them from a better suburb. Yeah, I love that. And I think the key bit there, again, written in behind what you're saying, is that the finished product by 422, because of its broad appeal, and providing it's got an owner-occupier appeal, which I'm sure it does,

Starting point is 00:35:26 it's a it's you know I don't know about you but I'm always thinking before I buy a property who am I going to sell it to and I always want to be selling it to an emotionally driven purchaser at the other end that that profile is got the best chance of appealing to emotional other owner occupiers not not stuck into you know partners and townhouses that are generally limited to the investor market who are who are buying through a spreadsheet not through the heart so I think that profile also gives you that insurance policy to some degree in terms of if you if you don't hold it and you do need to sell up then you're opening up to the biggest buyer pool as a as a consequence want to be right and saying that absolutely and if you

Starting point is 00:36:06 want to dig further what it really means and you know a good agent will know this is if you're coming to someone that's more mature that has a you know older family and they know they can be there longer that's where that emotion comes in it's not necessarily they love the house they go we're going to be here for 10 years does it matter if we pay 20 grand to beat this other buyer or if you go back into where they're coming from is they probably have another sale. They probably made that purchase on an apartment that they're downsizing from. So they've got equity. They've got cash to spend.

Starting point is 00:36:34 So that was the example of the studio. If someone's scraping together, that's who your end user or your end seller buyer is going to be. So when we're going in here, we're not going, okay, let's knock down this house and build as many as we can. Okay, we end up with a bunch of two and three bedders. We're going, no, purpose for fit. We know what we want to create. And if you work backwards from that and you work backwards from a point.

Starting point is 00:36:55 of I don't want to start this project unless today I could snap my fingers and get my capital out. We just don't buy it. And it's a, it sounds really simple, but honestly, it really is like, you know, we've been doing this for a while, so it's kind of all in the noggin, but you just, you know, you don't make offers you're not happy with, so you don't buy properties for prices you're not happy with. It's like that.

Starting point is 00:37:17 Yeah. And what that also means is you basically, with the model that you're pursuing, and, we're What happens with the market doesn't matter. It's going to have, if you're basing it on what's happening right here right now, and I'm going to get my capital back on completion, then it takes all the vagaries out of what might happen down the deck out of the equation. So just by being, and then that's what you're doing is quite a conservative approach in reality in the context. So that's building in its own protections as a consequence of all.

Starting point is 00:37:50 Yeah. And, you know, it's one of the cool things about what we do was, you know, that example of like, okay, under the new changes, do you have to take a really low LVR to be able to hold something and wait for it to grow? Is not only do we have the market growth during the project, replacement cost, all of a sudden build cost going up is a good thing for us. And then you also have the new shiny wow factor. But then all of a sudden, this might be the first of only three, three, four bet is sold in the in the suburb for the last 12 months. And, you know, on our feasibilities, when we started the Perth ones, we were using values of about 650. I think it was about 11 months into the project, the first four-beda-sold,

Starting point is 00:38:27 which was really a three-beder, 10 years old with a fourth bed attached to it, sold for 915. Nice. I mean, most of our valuations have come in at a million dollars or more, and we've seen sales of a million is 60. So you can imagine if we're in a position where we're getting just our money back, liquid our money back in our pocket at a valuation of 650. You can imagine where people are sitting at when you're starting to talk about a million dollars.

Starting point is 00:38:50 And that's not even factoring in what's the original house worth. Yeah, that's toy, I jump material, right? Let's start sort of poking into the numbers with the stick a bit because I'm guessing there's plenty of sites that look exciting for the first five minutes and then start leaking like an old tin roof once the real checks begin. So what are the early deal killers that make a site look exciting at first class, but ugly once the real feasibility starts to kick in? One of the biggest things is being in an area

Starting point is 00:39:20 where you can either see or make the assumptions that you know how much value, you're going to lose in the property by taking that land component away from it. Because effectively what that's doing is that's telling you how much the land costs you today. And you need to then put the rest of your cost on that project. So if you have a property that's worth 800,000, that's going to be worth 500,000, and then you're building for 500,000, but that's only worth eight. Well, then you're in a position where you're in and then out for the same money. Now, when I'm talking about we're in and out for the same capital in your hand, that's where we start. You still need to be in a positive equity position because you're refinancing to 80% on today's

Starting point is 00:39:59 numbers. Yes. So end values is kind of, before we even go into an area, we need to know that the end value stack up. And where we're operating in Victoria at the moment, I have this conversation with all kinds of people, whether they're trying to sell me stuff or the people that we're working with. I go, oh, what about this suburb? Instead of buying for 500, you could buy for 750.

Starting point is 00:40:20 I go, okay, we're seeing the same decrease percentage-wise on the front one. but what's the new house worth? Oh, it's worth 50 grand more. Okay, so I'm going to go pay a 250 grand more for a site to get a 50 grand uplift on the new value. No, it's, it doesn't make sense. All these numbers, if you're only concentrating on the outcome you want from day one that has no speculation in it, it itself mitigates a lot of this financial risk. It's the same with the due diligence on the blocks. Yeah.

Starting point is 00:40:46 I love that. Are there any other sort of rookie mistakes that people get themselves under trouble with when they start down this road without someone like you holding their hand? You know, it depends what state you're operating in. You know, one of the small variances when you're talking about side accesses, but comparing Western Australia and Victoria, is your side access requirement

Starting point is 00:41:07 is to the boundary of the property in Victoria. Yeah, W.A's the Eve, so people can get caught out that way. You know, one of the biggest ones is Victoria has these things called special covenants, or restrictive covenances, sorry. sometimes they can be written in old English, sometimes they're from the early 2000s, when they were implemented and what kind, whether it's a material or a single dwelling or a single height,

Starting point is 00:41:31 all of that matters. And it doesn't mean that you can't necessarily do a project, but it does mean that you might add a few months in another six grand to your legal fees. And you've got to remember, you know, you're talking about property being art. We don't want to buy a canvas someone's half painted on. We want to buy a blank canvas that is match the colors for exactly what we want to do. And that's where, you know, we've done. this for doing this and have done this for people that have bought the properties and they're not ideal but we can get them out of their situations and and still have a good

Starting point is 00:41:58 result but the killer ones are when we're controlling it from purchase to execution because you know we we don't have any of those roadblocks because we're not driving on the road with the roadblocks you know you have the choice um you know one of the one of the big things is i i it kind of looks like this would be the last time we can do these projects for a million dollars. So I'm talking like side acquisition, all costs, you know, we're aiming around a TDC, like total development costs about a million dollars. Because once you start to go, you know, in WA, again, depending on the zoning, but like we've done stuff on the 600, 650 square meters. We're doing that in Victoria. And, you know, we were buying around the five, six hundred thousand dollar mark.

Starting point is 00:42:42 You know, if you go on real estate.com, you put in, oh, 600 square meter property for 600 grand in New South Wales or Queensland, you're going to see a lot of hits. When you're looking at doing a real subdivision, you need 1,000 square meters to start with. So you've got to have a 600 with handle, 400 on the front. So there's state-specific stuff. And then, you know, why don't we go up and do this in Townsville? Well, in Townsville, you've got two builders to choose from. And things cost more.

Starting point is 00:43:09 You know, there's travel cost. And there's a bunch of different things. Yeah, it's There's so much to go into. Yeah, I know. You tell you by granted, and for someone coming into this going, this sounds interesting,

Starting point is 00:43:27 but what does it mean to me? We'll circle back around some of that game. We'll tease some of that out. It's something that I want to sort of deal with it a bit, Dave, and you've sort of tussed on this already, and I'm sure it's something you've got your head all over, but I want to wrap this in a bit of bright orange caution tape, so no one's confusing it with advice when we're talking about it because it's just a hypothesis

Starting point is 00:43:49 is not a recommendation, but it's exactly the kind of thinking that I think the budget changes they're going to encourage investors to start exploring. So if someone owns a well-ocated owner-occupied home on a subdividable block, where there may be a future pathway to subdivide, build a second dwelling, then potentially retain both as investment properties when they later buy another owner-occupied home, so they're basically scanning away from the CGT implications, or they can sell one, keep one, depending on the nitty gritties of their situation.

Starting point is 00:44:18 So from a site selection on development lens, what would need to be true for that idea to be worth exploring? To do it as an own occupier? Yeah, well, say you own the home, you've got enough land, you can carve a chunk off, you can build another one, and then if you've owned that existing home pre the tax changes, so it's effectively going to get the old. treatment in terms of the tax and then then you either buy another place to go and live in.

Starting point is 00:44:50 Is there anything that people need to be aware of around thinking that way or pros and cons that multiply to that? You know, like anything to do with finance or taxes, you know, speak to an accountant. Look, I'm not 100% sure. You're always going to get that gearing benefit and there's a lot of talk about, you know, moving out of your PPR and then retaining that and then getting another one. When you're talking about a PPR and then subdividing, well, no, so if it's a PPOR, it's going to be in your name.

Starting point is 00:45:23 So if you subdivide and build a new one, that new one will be in your name. So yeah, actually, don't quote me, but yeah, I believe actually that it all be gearable now thinking about. Yes, that's one thing. And, yeah, you know, the owner-occupied scenario is actually fantastic, where we typically look at, you know, holding properties and building portfolies and stuff, But man, if you could live in the front house, sell that off with no CGT, live in the back one, sell that off after 12 months in no CGT. And then you can keep moving on.

Starting point is 00:45:51 I would 100% recommend it. And if possible, if there are a first-time home buyers out there, they can stick that out for a couple of years. They can really put themselves in a position where they can actually buy where they want to live. I'm a huge proponent of that. Yeah, it's a leapfrog strategy really that can, use the change in inflection to actually help them progress a lot faster.

Starting point is 00:46:17 But another strategy that actually Max Phelps originally flagged with me when he introduced me to Dube, which is the one you'll probably remember, the old buy one, build one, sell one, keep one. And that sounds beautifully simple, of course, but it's usually the exact moment that we should start checking whether the sausage machines still got all its fingers. So can you walk us through that,

Starting point is 00:46:38 the buy one, build one, sell one, key one approach in plain English, and explain where the value actually gets created with that? The value of creation on day dot is, if everything works out correctly, and this is the starting point for when we buy stuff, is the value in creating the cost of creating the new lot and the new house plus your loss in the front, whatever that reduction is,

Starting point is 00:47:05 is lower than whatever the value on that rear one is. and the loss on the front property is not so big that it eats into all of your equity that you're creating. And the benefit to this, which I think what you're asking, is by retaining the new one and selling the old one, if you do that multiple times, you're leaving behind a portfolio of brand new builds. Where are most brand new builds? In the middle of fucking nowhere.

Starting point is 00:47:39 Exactly. on the fringe of the universe, yeah, exactly. Yeah, so, you know, what we're doing is called infill development. We're infilling demand in established areas. So, you know, we were doing this 10 minutes from the CBD in Perth. We're doing it 11 minutes from the CBD in Victoria we're operating. So we're able to create these products that are, you know, getting X amount of dollars 20, 40 minutes away right in the heart of these areas.

Starting point is 00:48:08 and the benefit to it, and we always tell people when we're starting this that, okay, in our head we're going to look at the feasibility that we're going to keep the new, want to sell the old one, because that's what gets us that scenario. But then when you have the growth, I can't force anyone to do anything, keep both of them, sell both of them. You know, what you would never want to do is sell the new one and keep the old one because of how the tax implications are and then how the cash flow works. But what it means is you can, in 18 months, be retaining a property and moving on to another

Starting point is 00:48:37 site, which is exactly what we've been doing. And if you really want to get into the nitty gritty of it, you know, we've done this in Perth and in Victoria is, you know, halfway through the process, you'll get in DAs and bill permits, you're going back to the bank and saying, hey, you know, even without property growth, we just want to add our improvement costs onto this. You're either fully funding the build or if you're adding growth into it, you're basically fully funding your outer contract and contract costs and then pocketing money. And in Perth, that's what happened. Some of the properties we ended up buying in Victoria early on, they were actually funded from the development. And using that scenario, one of the projects in Perth has been done by someone

Starting point is 00:49:22 with $108,000 and they're pulled out $76,000 while keeping the new one. Because they just paid the deposit and the stamp duty. And we got so far along and then basically refinanced the deal. and I think they have both of them still. But yeah, they did this with $108,000. I think there's probably the most extreme case. And typically we want to start this with a, you know, our spreadsheet will show, okay, we've got the capital to go 20% in the purchase, 20% bill contract, stamp duty, out of contract costs.

Starting point is 00:49:55 We can technically do it all, but we will always go for that refinance because if you can keep cash in your pocket, why not? You know, property is one of those things where you do want to be using other people's money. so it's a lot less rigid than people think and you know like those those particular clients you know they were a bit more gung-ho and you know things worked out but even you know we're having a bit of an interesting time this year in Victoria like our valuations that we're getting are not pumped up by growth it is it's not that kind of year and it's it's still working out

Starting point is 00:50:32 because to be honest, everyone looks good in the bull market, right? So, again, it's just very happy to kind of review everything and go, hang on a second, we're still going to continue to do what we're doing. You know, if anything, we're looking at bigger projects. But there's a real gap between project sizes where, like, keeping it around a million dollars or, you know, like one, five and under, there's some good stuff. And then your next jump tends to be around, like, high.

Starting point is 00:51:02 twos to make things work. Because, you know, much like, you know, when you're buying cash flowing properties, you're typically buying in lower purchase prices because of the way that rent scale with purchase price, right? A $10 million house doesn't necessarily have to get $100,000 a week or $10 grand a week, whatever. The bill costs don't follow your GVR, your gross realized value. So what does is the site acquisition.

Starting point is 00:51:29 But for instance, you could go and buy a site that's... worth $2 million and you're building for $800 and that $800,000 property is worth two and a half and that $2 million one's worth $1.8. Well, now all of a sudden, off the rip, we're actually incredibly profitable still doing this retained and build execution. But the caveat again to that and why even clients or other bigger projects we're doing at the moment, we're still doing these smaller ones is because those markets, you know, depending on where support levels are for government schemes, depending on what state you're operating in, you know, those markets, particularly around the like the mid to low twos in New South Wales are getting smashed at the

Starting point is 00:52:09 moment. And you're finding a lot of support around the one five level. That's, you know, you know, no LMI, 95% scheme. And you see that similarly elsewhere. And, you know, on these million dollar projects that we're looking at doing, where we're always looking at kind of three kinds of affordability is the first one is where's the first time home buy-off scheme for the state? the second one is what's the national investor average loan that they can get and that is probably changing but for a long time it's about 800,000 and then we want to be looking at what's the average household income of the areas we're operating in because we do not want to be building a product the people that live there can't afford so you know these are all the things that

Starting point is 00:52:50 you know you need to go through and that comes back to more of the beginning of the process of why do we decide to operate where we operate you know like pillars of employment you can't just have one sector in the area because, you know, the imagery, one pillar with a roof over it, one pillar comes down, you know, you're going to have a sore head, that roof's coming with it. You have a few different pillars, you can afford to lose a few. And that's just, again, risk mitigation. But, you know, even beyond that, you start to look into the government and private infrastructure spent, you know, where are the new Amazon distribution centres going? Where's the new conference centres? So you've got to have a mix of kind of all this stuff,

Starting point is 00:53:29 at every stage, whether it's where you're buying and it's the makeup of the people to the product that you're creating. You want the most of everything to create safety. And then if you don't need growth and you don't factor it in, it's just everything's kind of, you know, works out better. What I'm loving about the precision with which your feasibility operates for an opportunity to pass the test, because you've already incorporated all of the drivers, all the factors that need be considered the price pointing, the income levels. I call them the three eyes of growth, the infrastructure, industry and incomes. So as key things that if they're not reaching the right levels,

Starting point is 00:54:11 they don't have the right diversity, and it's increasing the access and growth in an area you don't even consider it. But you've already built that in. And then by doing infill stuff where you've got the demand's already proven, but you're adding properties too. I call these a property platyposed where you're using an existing body.

Starting point is 00:54:34 You're adding a new bill and a long tax tail on the end of it. Then there's just great opportunities that really bringing all of that together, mate. But there's something I just want to test it a little bit if I can because if an investor starts doing a number of these small divisional or, you know, opportunities, is there a risk that they may start looking like less of a passive property investor or more like a property trader or developer in the eyes the ATA?

Starting point is 00:55:03 I mean, the implication there would be no way around CGT if you're trying to get out of it within five years because if you read the legislation, it's basically there's extraneous circumstances. Well, you can only have extraneous circumstances so many times. But again, it comes back to, you know, there's pros and cons to everything. And if we're undertaking something that has a con,

Starting point is 00:55:24 there's more pros that outweigh it. It's like, you know, okay, you've got to pay your asset fees every year for your entities. But just having something in a structure outweigh not having it in a structure. So, you know, if we're doing this, like, again, if it's under structures and we're keeping things, there's not really too much of an implication unless you're trying to get out of things, right? But, you know, if you're undertaking a project that has so little fat in it that that that is a consideration, then I would suggest probably don't do it. Because, you know, you also want a lot of leeway. Like, a good example would be in our bill contracts or in the number that we use for our bill contracts is, you know, we reviewed it after the first seven went down in Victoria.

Starting point is 00:56:14 we've taken the highest price across seven projects for every element. So the highest drainage cost, the highest electrical, the highest site, and that's what we use. And even beyond that, we have, this is actually directly relate to our website. So within that, we will have things like, you know, an additional seven grand for lighting on common property driveways. Why would we have a common property driveway? Maybe we need a pump system. It's a bit of a Victorian thing. That if it has to be powered by both properties, it requires a common property.

Starting point is 00:56:44 property area for it to be owned by both. And then you also need to pull the meters at the front. Now that's like 30 grand worth of contingency. But if we start with that and we buy a property where we end up having to do that, it's still a good deal. We buy a property, we don't have to spend that money. We just don't spend that money. But what we're effectively doing is, yes, we've got the feasibility and the experience and we're doing it around the area, but I'm saying to someone or, you know, I'm saying to myself, I'm going to buy this property and I'm going to run a feasibility and viability that I want to be as close to true without even getting a survey, without even putting a property under contract. And the only way you can do that is by being as

Starting point is 00:57:25 rough and contingent as possible. You have to expect everything to go wrong. And there are cases where we've got everything approved. We've been ready to go and get our approvals from council after endorsement, after planning's looked over at multiple times, after water corps looked over at multiple times, then all of a sudden they'll come back and go, actually, we do want a pump system in this, even though you have a front to rear fall and there is a stormwater service there, yeah, we would actually like you to put your pump system in and have two legal points of discharge, even though there's one pump, there's two properties. The second point doesn't, it really matter.

Starting point is 00:58:00 If we didn't plan for those things, or even if we got to the point where we went, okay, we've already started, we don't need that, we don't have our peripherals, let's take that out, then it's going to feel like a bad experience. It's going to feel like we've missed something to no fault of your own because a lot of this is, again, there's the human element behind it. You get Johnny a planning who's had a shit day and his team's lost on the weekend. Maybe he'll throw something at you. You know, we see that with arborist reports, you know, tree planning.

Starting point is 00:58:27 Some people are just a lot more, they're a lot stricter around things like that. So even to the point where when we're getting our fixed price contract, contracts, sometimes they will have fat still in them. And that means that if, you know. Well, they should. They actually should. I used to be an architect and a project manager, so I assist a lot of investors in that direction. And if a builder is offering you a fixed price contract, they've got to build in, they're taking the risk, essentially.

Starting point is 00:58:58 So they've got to build a bit of that in there. And if you've got some contingency stat on the outside of that, then the numbers still work. Happy days. And what I like about what you're sharing, Hayden, is that you're planning for the worst, but always managing to the best. So if you've identified every potential risk that's out there, and you've thrown a number at it,

Starting point is 00:59:17 and you've got that set aside, and it still stacks up, anything on the other side, that is bonus if you're able to manage it through it and if the Alvarez is having a bad day and he decides to impose something that otherwise wouldn't, well, it doesn't matter because you've already accounted for it. So, let's make this,

Starting point is 00:59:35 this real world if we can because, you know, this can sound terrific to someone who's listening in. But can you give us a couple of examples of, and perhaps do at each end, one that's worked really well and why. And then on the flip side, one that hasn't worked well and why and what were the learnings if you can. You might not have had a bad one from what you've got. You're saying your feasibly so strong. You're not unlikely to have had a bad one. But you might share an example of someone else who's done it without your assistance and share some of the law. learning's there. Can you do the good and the bad? You know, we haven't really had a bad one. I'm trying to think. Let's start with a good one. Tell us about, and you're just on a couple of

Starting point is 01:00:17 good ones already, but put some shape around that so anyone who's getting excited about this can sort of understand how it all comes together. A good project is the existing home is rented out. And when we're done in our time frame that we're able to get all of our money out like we simply would and keep that new property. All of them have exceeded that. And yes, it's partly from, you know, setting such a contingent expectation. But no one can, no one has the crystal ball. It's, it's the real world. And the reason I bring up, like, we leave fat in the fixed price is, it's not the builder's job to building contingencies. Regardless of whether it should be or not, you'd be surprised how few things, how many things you think should be a builder's responsibility or they should do that

Starting point is 01:01:02 they don't do, they will just go and fix price everything. This is what your plumbing cost. This is what your bill costs, et cetera, blah, blah, blah. And then all of a sudden you need more crushed rock for something. Or they take a fence down accidentally and you didn't have that in there. Like that's where it becomes, you know, yes, they'll happily just raise that variation and put it back in the contract. But if you don't want to go back and redo your finance, which you don't, then that's coming out of your pocket. So, you know, things like that. That's a capital requirement. That's much higher. like pull on you, then it is something that's leveraged in a bill contract. So if you don't know that, like a fixed price contract is not really fixed price because

Starting point is 01:01:41 there's still things that can happen. Of course. You're not in a snow globe. It's not a, you know, a vacuum that you're operating in. You know, in terms of bad, you might relate one that you've seen someone else and you saw the catastrophe occurring because they didn't apply some of the things that you do. Can you share something in that way? So I know someone that wasn't a fan of what we were doing.

Starting point is 01:02:11 But they did it anyway. No, no, it's better than this. So we're in these projects for a million dollars. And the Perth ones, we target 18 months to 24 months, and that's to titles. From start to go, we're also building a double brick in Perth because that's where all the bricks are made. it's actually cheaper to, so when we're building a brick veneer, you know, coming to a site with frames, not only use the process faster, but you know, you're any time before the roof stage, you're open to the elements. And then to a certain extent until lockup, you know, trades can only do so much as well.

Starting point is 01:02:48 So by the nature of the curing of the bricks before you could do the next layer, taking longer, you also are then, you have a longer section where you're actually getting more weather delays. But, you know, we were wrapping up projects in, I think some of them were done in 15, some of them were done in 18. It's been about a million dollars and, you know, I'll use that example of the client that, you know, they pulled out $76,000 while keeping one of their houses. I think they've actually kept both. There's a gentleman that wasn't a fan of our numbers and didn't think it was real. At the same time, it went to Brisbane and he bought a property for, I think it was like, I think he bought a property for a million dollars. He's built

Starting point is 01:03:27 He's knocked it down. He's built two duplexes for, I think, it was like a 600 aside, or maybe it was more than that. Basically, I know that from the last time I looked at it, he's ended up spending double, and he's going to spend twice the amount of time, and he's going to pull out about 600 grand. And, you know, if you look at it, they're really nice. They're two double story, four two twos, all the finishes. But, you know, you could have done, you could have made more with less in a shorter time. Like, I think in development, there's so much less is more until you get to a grander scale,

Starting point is 01:04:02 until you're looking at something where you're either in a high enough end value range or a high enough market where you can have a big gap between your bill cost site and then your end values. Or if you're in a lower end value area, you need to be, you know, obviously site costs and everything comes into it, but you need to be doing, you know, townhouse developments of 7, 8, 9, something like that, whereas you need to have enough to actually free coupon. on. So again, it's not necessarily just the price range. It's like, you know, yeah, it probably would have gone and spend $2.5 million or maybe low twos. And don't get me wrong, like that over three years, you know, you break it down. He's been 200 grand a year. You know,

Starting point is 01:04:43 that's a good result. But there's just better ways that can be done. And again, it's not the easiest way to do it because you have to plan for a house that you can't move unless you're in Queensland, then you can move it much easier. But, you know, it pays off. Again, you know, I don't create more work that I have to do for my clients because there's an existing house there if there isn't a substantial payoff compared to, you know, doing something else. And, you know, even down to the minutia of, you know, we have the properties rented out.

Starting point is 01:05:13 They don't make it deposit. But an extra 400 bucks a week, 600 bucks a week, it really does help because, you know, what you're doing is you have to take on the responsibility, you know, if you're doing yourself, you have to take on the responsibility that what you're doing is not only the end result is viable, like can you carry it? Because it's very much like, you know, like your original example of people holding properties is you could be in a position where you screw yourself and you have to sell a property after five years in the market's bad, but if you'd wait at another five, it would be really good. So if you're not counting to weather that storm, well, if you try and sell a

Starting point is 01:05:49 project while there's a bill halfway under, you're going to be selling it for peanuts because no one wants to take that on. It's land value, basically, if it's half done. I've seen that in the past back in the days when I was in the game. So, yeah, and then that's where the buffers, your own personal buffers, whether it be through equity lines or other are really key because that's the cushion, basically, that's going to carry any variations that occur along the line. But if you don't have them, don't do it, is generally my thoughts.

Starting point is 01:06:17 So I'm sure you've got a formula around that. Let's sort of land this for investors now, because the goal today, isn't a send everyone charging to the backyard with a tape merger and a dream. Because the real goal is really to help us work out whether this belongs anywhere near an investor strategy. So given the experience you've had, who is this approach generally suited to and who should absolutely abort it in your experience? I mean, the cheeky answer were people that don't want to make money should avoid it. You know, it's marketing always asks this.

Starting point is 01:06:53 your ideal client? What do they look like? What's their avatar? I absolutely detest the question. Yeah. I see the commentary. There's going to be some, there's going to be some guard rails here around who can act, because it'll be from a capacity thing. There'll be certain people who just don't make the grade. And there's also some people who are in their head, because you would know, stuff won't look great on paper, but if their nervous system isn't built for it, they won't last the distance like you just touched on before. So can you, can you give, for those listening in, that there may be a couple of things you've seen that you'll say, yep, if you're like this, then this is going to be a great solution to you. But

Starting point is 01:07:31 if you've got these issues, then perhaps you need someone to hold your hand through it. Can you give us a bit of shape around that? So, you know, the common thing around people that we work with, and I've got people that work with, they're in their 60s, people that are in their early 20s, two of my clients that were halfway through projects in Victoria just had their first children, like within the last two months. And one of those people, they're in Cuba at the moment, the other one's in Europe. So they're traveling. That's how hands off this could be.

Starting point is 01:08:02 The common thing between all of them is the people that don't want to just sit back and be passive. They want to be proactive. And I think we started off saying this in the beginning is now is the time more than ever. It's always been the time, but now more than ever. But, you know, the example would be that I always start with this because you have to talk about it as a full process, you know, start to finish. It's a two-part process. And, you know, the first part of the process is buying the right property because I have a couple of clients where we bought in Perth a few years ago. We bought in Victoria last year.

Starting point is 01:08:38 We've just bought in Queensland and New South Wales for each individual clients. Why do we do that rather than starting the developments? because they were getting married and they wanted to throw loads of cash out of it. So we knew that we were better off picking up the properties while we still had that servicing before they were actually married as well and while they had that cash to do it because we can always go back. It's so much easier like looking at the we're starting two projects on properties I bought for people three years ago in Perth. You're kidding me. It's beyond 100% funded. And obviously you need to find a good broker that actually understands what that means and how to do it.

Starting point is 01:09:13 But you know, that's why I don't. discriminate is if you just want to buy a property and sit back and capital appreciation is your thing well if you bought one of these with me and you change your mind in a couple of years we could do it if you didn't you know but the potentials too sits there so you don't have to pull the trigger today but you know you can do it later on that's that's yeah that's basically banking the opportunity yeah yeah we have lots of people where we've got sites that we haven't started on yet but we know that whenever we and and for whatever reason so like i give you Some of the examples, the dudes that are having the weddings, their brothers,

Starting point is 01:09:47 that just happens to be weird timing. I have a client that we bought the property in 100% cash, but she doesn't have any servicing. So we're sitting on that and they're going through someone specific for that kind of lending. I have another client where, you know, in our feasibility, our cash requirement to do it all is very, very contingent, is very, very fat because we capitalise the interest costs for the construction loan and the holding the property. they're very conservative. No points for guessing here. They're both accountants.

Starting point is 01:10:17 So, yeah, we had a meeting three months after settlement. They weren't quite where they wanted to be. We have another meeting coming up. It will have been six months. If we're not ready yet, we just don't do it yet. But as we go, you know, it's don't time the market, time in the market. You know, it is true. As, you know, as annoying and cliche as it is to hear.

Starting point is 01:10:39 And you have so much more flexibility. once you actually have the property. The one person, you know, and again, this depends where you're buying and what the numbers look like on the initial site acquisition. The one thing would just be is, you know, someone that, if we're talking about Victoria,

Starting point is 01:10:55 you know, oh, we're only talking about maybe $1,000 a month, anywhere between the 1,000 to $1,500, maybe a little bit less, but that would probably be your negative cash flow initially on the sites. So if that's not gonna be something that you're gonna be able to handle,

Starting point is 01:11:08 well then let's have a chat and get in a position where you can handle it. No, that's kind of pretty well, mate. So now, in our prep for the day, and this is a fair while back, so you may not remember this, but you suggest that the one question you wish investors would ask you is, how can I be doing a purchase a year and developing those purchases all around the country? What's your answer to that? How can I be doing one every year?

Starting point is 01:11:32 Yeah, yeah, you probably remember when I reach out to you at the start of this exercise. Oh, yes, yeah, yeah. And the question that, you know, you wish, you. investors would ask you is how can I be doing a purchase a year and developing those purchases all around the country. So he's right. He's a great response, man. I think I set you up because I'd say that's the strategy that we employ. That's exactly what we're doing. Yeah, okay. I guess the whole episode has answered that. Let's shift it then. If there was one final message you'd love to leave with an investor who's now

Starting point is 01:12:06 thinking, hang on, maybe property has more potential. I realize, what would you say? I'd say for anyone, whether you own a property or you're looking to buy, there may be unlocked potential in your own portfolio. If you're having problems with servicing because of how your portfolio is structured, there might be a way that we can unlock it without you having to sell pay stamp duty again, get agents involved that can put you in a good position while keeping a property there. You know, take it all the way. Actually, I'll tell you, it's something I'd really like to leave it on. It's probably young people or people that, you know, feel like the markets gotten away from they can't do anything. I had an example with someone where they had about

Starting point is 01:12:45 $70,000 and that is a lot of money. But he was a trading and I showed him a perfect example in about five minutes up the coast here in New South Wales where he could buy for the 5% scheme. He had enough for materials and he had enough to pay his mortgage for six months and he could do a flip, putting his own labor into it. And I think there was like 150 grand on it. You've got to bear in mind is the first time home buyer. There's no CGT once you hold it for a year. And you're also not paying stamp duty and you're doing it on a 5% deposit with no LMI. So although you have a high LVR, you're not getting penalized for it.

Starting point is 01:13:18 And that guy, he went and went aboard a very expensive car with all of his cash. So there's a lot of people out there to think that they can't do anything in the real estate market. But, you know, I'm not saying don't go and have your avocado toast, but you can do a lot with relatively little money. And, you know, to my point with the clients where we've done full-blown projects with $108,000, you know, I think my second purchase I ever did, I didn't have enough money to settle the loan when I bought it. And I got a three-month settlement and I ate noodles and dust for three months. I've been there. I've been there. That's all I was on the phones on my bum when I started too, mate. And the best part of that is you get inventive and you get gear back from that when that happens.

Starting point is 01:14:02 and you do things that because you know you might make a sacrifice now, but there's a big payoff conning. So I think that's the key message here is that for a lot of young people who think, oh, the door's been closed, we'll stop listening to the nightly news, start talking to people who are about solutions, not problems. And there's always going to be a way to create an opportunity if you're serious about making, mate. And I think that's a really good point.

Starting point is 01:14:27 So let's shift gears now into what I call the ambush fast bore or the bushfire. or the bushfire lightning where I'm playing off my nickname and so I'm looking for fast answers and you know I'm going to give you a blind fault and cigarette you know Hayden so let's leap in. What's the biggest myth

Starting point is 01:14:45 about small property development that you'd love to bury with a very large shovel? That's super expensive. Yeah, right. What's the one number of assumption investors often get wrong when assessing a development style opportunity? I'd say it's probably end values

Starting point is 01:15:00 it's it's yeah in values and cost sorry i'm trying to keep this short is you know find out all that stuff before you take it on don't buy the property then try and find your builder that's going to do it for the right price uh yeah yeah built it on pay me before you buy it on in real spot on what's one property or development lesson that you learn the hard way that now saves your clients from learning it the expensive way understanding driveway requirements from council yeah yeah that's a good one. Specifically materials. Yeah.

Starting point is 01:15:32 Yeah. The old crossover's exercise is always. It varies everywhere. So I love that. Last one. If we think we might be sitting on hidden development potential, what's one sensible action that we can take this week before we get carried away with a tape measure of a bunning sausage and a dream?

Starting point is 01:15:48 I mean, I'd love to say give me a call. It takes about five minutes to work it out. No, I would say if you want to give it a crack yourself, and I always employ people, it implore people, whether it's a purchase or it's a development, go and give it a crack for a few weeks because you either get the result you wanted by yourself

Starting point is 01:16:06 or I don't need to show you why I provide value. It's great. It works for both of us. I often say, man, you've got to get a blood nose first before you realize the benefit of getting an expert to do it. Yeah. That's really good advice because if there's one thing that I can pick up on from everything you've said,

Starting point is 01:16:22 that's the amount of detail you go to to consider every aspect and part of this exercise. So the risk protection is built in. So if it passes your go-gate, then it is a goal. That is crystal clear. And, you know, I'll get you back on for another episode at a later stage. And we'll deep dive on a FISA and go right through it so that we can, because that will demonstrate very clearly just how much effort you put into managing this process.

Starting point is 01:16:54 because it's, you know, it sounds simple, but it's not. I know it's not. But clearly, you're doing extremely well. And you're protecting the investors who are taking advantage of that by the built-in gates and guard rails that you've put in place. So last question, mate, if I ask you to get invested, what does that mean to you? It's a broad spectrum from starting, developing a property I already own,

Starting point is 01:17:19 from, you know, being ready and actually taking that leap and buying all the way to, I'm not quite ready in speaking to a broker, all the way to I don't even have the deposit, but I'm going to commit to putting $10 a week away. That, you know, you've got to start somewhere and you can start that investing journey at any timeline. It's not just buying a property. There's so much that leads up to it. So, you know, I don't care if it's a dollar.

Starting point is 01:17:43 You have 365 plus whatever the interest is in your account by the end of the year. And it just put the money away if you don't have it or if you do, start taking action. and I truly believe now is a great, a great opportunity. Because all I hear is people complaining about how hot the market is and how hard it is to buy a property. And now I'm having a field day out here. And, you know, people are sitting on there trying to pick the bottom. And, you know, there's an old saying that those who try and pick the bottom end up with

Starting point is 01:18:11 sticky fingers. It just doesn't happen. You'll end up into a dead cat bounce. You're 100%. The best time is every time it can, in my view. And windows of opportunity like this, I'm a, a boring contrarian so when everyone's talking it down that that's when i uh move hardest actually because while everyone is it's one of the easiest it easiest market indicators to work out

Starting point is 01:18:33 it really it's it's it's crazy yeah it is crazy now for those that are like myself who've really resonated with your message today mate uh where can they find out more about you uh give me a buzz by numbers 0431 433 347 as you can tell i love talking i'm i'm always open for a chat we've got our website at www. www.goldenegsproperty.com. We've got Instagram, Facebook, all under Golden Eggs Property.

Starting point is 01:19:01 But honestly, WhatsApp, text message or call, that's where I prefer it. And, you know, if I can't speak to you right then, we'll book something in for as soon as we can because I love what I do.

Starting point is 01:19:12 I'm very fortunate. Yeah, I can see that. Now, we'll put all of the links in the show notes so it's easy for people to just click and get in touch. That I really want to thank you, mate, you know, we've only just scratched the surface, really, of what I see is a really growing opportunity.

Starting point is 01:19:28 It's always been a good opportunity, but it's an even better one now, given things are more stacked in that favour. So I really want to thank you for sharing all of this with us. And as I say, we'll get you back again to deep dive in the future. But as we close for those Freedom Fighters listening in, we hope today's conversation has helped you to see property throughout a different lens, because the question is not long just what property should I buy. it increasingly, the smarter question is, what can this property become?

Starting point is 01:19:55 Can it add supply? Can it create options? Can it improve cash flow? Can it manufacture value? Can it help solve Australia's housing shortage while also helping you move closer to your own lifestyle freedom? But, and this is the big hairy butt, today is not a green light to go charging into development like a bull and bunnings.

Starting point is 01:20:14 Because adding supply can be powerful, but only with the right site, the right numbers, the right structure, the right buffers, the right team. and the right temperament. Otherwise, what looks like a backyard gold mine can quickly become a financial sinkhole wearing a high-vis vest. So here's my takeaways from today's chat with Hayden. First, many investors may be sitting on more potential than they realize. Not always, not everywhere, and not without proper advice. But sometimes the biggest opportunity isn't another property somewhere else. It's understanding the hidden of optionality inside what you already own or what you're about to buy. Second, new build and supply adding strategies are.

Starting point is 01:20:51 are likely to become a much bigger conversation in the year's head. With the budget property tax changes favouring qualifying new bills and additional housing supply, investors will need to think more strategically about what the rules are actually going to reward. And third, small development is no shortcut. It's a strategy. And strategy without structure is just a daydream of the calculator.

Starting point is 01:21:13 So your practical action step from the day is pretty simple for me. Don't run outside and start measuring the backyard. But first, measure your contingency results. buffer buffers. Then gather basics, your title, zoning, land size, frontage services, your borrowing capacity, tax position and your long-term strategy. Then speak to the right specialist before your dream grows legs and starts sorting concrete. And that brings me to today's quote of the week. Before you measure the backyard, measure your buffers, because the opportunity may be real, but the risk is real too. And your job as an investor is not to get excited, your job is to get

Starting point is 01:21:48 clear. So if today's episode has got you thinking, could my property have more potential than I realized? Or is there a smarter strategy for where I'm heading? Then don't just guess. Start with clarity. And if you only help getting clear on your own roadmap, your freedom numbers, your borrowing capacity, you risk and the best property pathway for your situation, feel free to book him with me for a personal solution session by just clicking the link in the show notes. And if you're keen to keep learning alongside other like-minded investors, join us on the Property Hub collective Facebook community. It's free, it's supportive and it's where we keep the smarter property conversations going without the spruce the spin or the Sautich machine sales nonsense. And of course, if you want the deeper step-by-step

Starting point is 01:22:26 process, you can start with our Fred and Falling Program and then move into the full property wealth program where I walk you through the complete framework for doing property properly. So another big thanks to Hayden for joining us today and helping us lift the bonnet on supply-adding strategies, hidden development potential and the difference between genuine opportunity and hide this fairy dust. As always, this episode, is general information only. It's not financial, tax, legal, lending, planning, building or investment advice. So before acting on anything that we've discussed to go,

Starting point is 01:22:56 please get independent advice from qualified professionals who understand the nitty gritty of your full situation because property can be powerful, but only when your plan is stronger than your excitement. So thanks for investing your time. And remember, don't just chase property, build your process because the right strategy and the right order with the right people is how you start living by design, not by default.

Starting point is 01:23:18 So get out there and live more, give more, grow more and become more. And in everything you do, remember to always, always get invested. Thanks for tuning in to Get Invested on the Property Hub podcast channel, your home for property investment insights and inspiration. Make sure you subscribe to Property Hub for free. Get your weekly dose of Get Invest in Inspiration, along with every episode of Realty Talk. Australia's top online property show for Red Hot Property Investing News and Insights

Starting point is 01:23:49 direct from industry leaders and influencers. And finally, I'll see you next time.

Property Hub - Investment Insights & Inspiration - Get Invested: Hayden Warren on the backyard gold mine, building wealth through supply

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