I'm not a land banker, so a lot of agents that ring us, I'm just like, "I, I don't wanna speculate on the property market."
Once you have that approval, it becomes so much easier for someone to borrow money to buy the site.
Most developers don't have an in-house civil arm.
Mm.
So you just need to find a really good engineer that can, um, hold your hand, help cost things along the way.
That's what helps you assess deals later down the track, and maybe give better advice to some of your students, 'cause you've made those mistakes.
You know, you don't need any qualifications to be a developer, but you better have a really good team that have done what you're trying to do.
You don't even need qualifications to be a town planner.
Did you know that?
Don't you? No. I, I thought you did.
No, you don't need to have qualifications to call yourself a town planner, but
Hi, I'm Andrew Wright, principal of Professional Southport, and this is the Andrew Wright Property Podcast. I've built a multi-million dollar property portfolio, delivering a seven-figure annual rental income, and led my real estate team through thousands of sale and lease transactions. In each episode, I share real deals and strategies that will help you find, fund, and operate profitable property deals.
The aim of this show is to provide education and build a community of like-minded investors who can collaborate, share insights, and help each other in each other's journeys. You can make excuses or you can make money, but you can't do both. So come and join us
Welcome back to the Andrew Wright Property Podcast, and today we're going to part two of the Land Subdivision Master class with, uh, developer and mentor, Carson Boldt. Carson-
Thanks again ... how you going, mate? Good, good. Had a couple- Could be ... minutes break. We're ready to go into part two. Ready to roll. Today in part two of the Land Subdivision Master class, we're going to talk about the, I call it the property development value ladder. Four different rungs, and as you go through the land div- land subdivision process or land investing business, there are different little milestones that you can reach, and at each milestone you have the...
You can sit down and say, "Okay, well, do we wanna sell? Um, does it make more sense to sell now or are we gonna go onto the next step?" And there's no more expert that I know than Carson in analyzing each step of the process, so we're gonna go through this four rungs of the ladder, and the first one is just simply, uh, buying a site that is in the path of progress where you believe that the, the land's gonna be worth a lot more down the track to subdivide.
And, um, Carson's a very active sort of developer. I'd imagine that's not one of your main strategies, Carson. Is that fair to say?
So that's the w- what's-
Land banking ...
land banking. Raw land- Yeah. Oh, yes ... just
buying
raw
land and-
No, I, I'm not a land banker, so a lot of agents that ring us, I'm just like, "I, I don't wanna speculate on the property market."
Mm. So, and that's fine if you've just got swaths of cash and you wanna just gamble. Unless I've got... I would only do it if I had some inside information that, you know, in, in a year or two- Town plan ... it's gonna be rezoned or, you know- Yeah ... and if I kn- had, like, a lot of confidence that that was gonna happen, I, I may do it because it's no different than getting a DA for 18 months than getting an uplift if I knew.
But a lot of land bankers have got a different approach. They're waiting, you know, long periods of time, and that's... I, I just wanna get in and get out, and 'cause I'm using private money for, for the most part, I've, I've only got a, at the most, a two-year window where I've gotta-
Mm ...
get some uplift. Um, otherwise I need to refinance out.
So yeah, land banking, we're just not at that level yet where we're looking at that at
all. Yeah, you've hit a, hit on a couple of things there. I mean, one of the disadvantages of that particular strategy, it's so hard to get money, uh, from a bank to finance land that doesn't generate any income-
Mm
particularly, uh, if it's rurally zoned. And my understanding, check with your accountant also, is that, uh, you, you know, you can't negatively gear a vacant block of land if there's no income. The tax law says that you can claim a deduction on this interest cost if it's incurred in the process of generating, uh, taxable income.
So that interest cost just goes to the cost base, which, uh, you know, there's a lot of downsides, uh, to land banking. And if you're buying rural hoping that it'll get rezoned at some stage, well, it could be a pretty long wait.
You wanna be sure, 'cause I've paid my land tax bills recently and it's- And land tax
it's not, it's not much fun. So, you know.
Put some cows on there and call it primary production for the, uh land tax exemption.
That's right. 100%.
So- Okay, so getting onto the more exciting stuff for Carson, um, we're gonna talk about the DA uplift, and this is such a big business, uh, model for a lot of developers who only go to this second rung in the property development value ladder, and that is getting a DA uplift.
And I, I call them paper lots, so it's basically just, uh, improving land to get approval to build lots, and then you can sit down and decide whether you're gonna flick it or whether it makes sense to, um, go a step further.
Mm.
Can you talk us through that value, uh, uplift. And in your experience, like, are you able to sort of say, "Well, this is the, the section in the, the four rungs of the ladder that adds the most value," or not necessarily in all cases based on your experience, Carson?
Um, not in all cases, but it's probably the one that you can get the quickest uplift with the least amount of work and risk. Uh, but I think fundamentally you need to be looking at it through the lens that the next person coming in has to make a margin, especially if we're talking bigger projects where you're gonna get the most uplift.
The banks aren't stupid. They, they're gonna, like, at a bare minimum, they're not gonna fund stuff unless there's a 15% margin, and the bigger the project, it's gonna need to be probably 20% plus. Mm. So if you're... A lot of people say, "I'm gonna go do a flip," and I look at the feaso, and they've got it running at a 20% margin.
If you get the approval, that's what the next person needs to make. There's no uplift. You need to, the feaso needs to save 30 or 40% margin so that you can take that 10, 20% clip, and then the developer coming in still makes a margin as well. So I will, I do tend to find, uh, we've sold a lot of sites where we're like, "Ugh, there's actually not a lot in this.
Let's just, uh, test the market at a higher number, and if we get that, it's not worth the risk of doing the development." And I'm surprised at how many people, once again, that are happy to land bank or they're just happy with skinnier margins. Mm. They might have a really big balance sheet, and they don't need to go through the banks to finance the development.
So we've, uh, sold a couple of projects where I was like, "I've got no idea how they're making money." Like, I've done the numbers, and I probably know it better than them because I've worked on this thing for 15 months. Yeah. We've priced it within an inch of its life, and I've got the developer coming in making 5, 10% margins.
But once again, everyone's got different needs. Sometimes they're builders that can... They're like, "Well, I'm gonna make a, a margin on the build, and that's where I'm making my money. I'm just happy to plonk my guys on a site- Mm ... for, for 10, um, you know, for 12 months or whatever." And they, builders are good to sell to because they've, they've created a beast and they don't wanna lose their crew, and sometimes they've gotta keep them busy, and they just buy a site just to kinda keep the wheels turning over sometimes, so.
Uh, but you can't- If you're gonna go into it as a strategy, you would need to be really thinking about, um, the next person making margin, 'cause I see a lot of people get caught. They're like, "Oh, I've got a DA, it's worth more." Mm. Not necessarily. The, once again, if the person, next person co- coming in can't make a margin, then you're gonna struggle, so.
It's interesting you just said, uh, "Oh, I've got a DA, and now it's, the site's worth a lot of money," but it, it, I've seen some DAs where the DA has all these conditions that you need to comply with to actually sell the thing, and sometimes those conditions are so- Mm ... expensive to do that it's, there's just no money in it.
I've literally said to, uh, an agent before, I said, "Even if you gave me the, the block for free-
For free ...
I couldn't make this stack up- Yeah ... to, to do what is approved." Like, and we could- Mm ... do a different approval, or- Mm ... I need to wait for the sewer line to get a lot closer. You, you'll see it- Mm ... in Logan all the time, there's emerging communities, and they're like, "Yes, you can get 40 lots."
I was like, "Yeah, but a, a sewer's, like, two kilometers away." Yeah. "And I've got to... You just, it's not gonna stack up." So yeah, once again, you need to, um, yeah, be thinking about it a little bit- Mm ... a little bit harder. Uh-
So this process of adding value into these paper lots or this DA uplift to get approval to subdivide it, it takes time, and- Mm
you've done quite a few of these projects. What, what is the period of time from the sh- quickest example to one that's drawn out that you've experienced? Mm-hmm. And it may well be because of the constraints of the site or just dealing with different councils.
Yeah. Uh-
And inefficient town planners versus good town planners.
A-
and councils as well that are development friendly and, and not so much, like we've got- Oh, the extreme end at one end we had a fast-track DA for a four-lot subdivision in, uh, Logan, got approved in six weeks. And then here I am on the other side still waiting. Oh, we got, took us three and a half years to get an approval in Tweed Heads because they're just so clunky.
Wow.
There's no real statutory timeframes that they stick to. A lot of the developers there literally just wait, I think it's 37 days, and just lodge a deemed refusal and go straight to court. I was like, "Oh, no, I want to do the right thing. I'll work with council," and here we are, you know, bleeding on the, on interest trying to, you know, do the right thing.
But, you know, council are just so slow and clunky. And, uh, so yeah, you w- you want to know what councils you're going into, and once again, your town planners will know the councils that are bad, and they'll give you some reasonable timeframes. Add an extra 30% on top of that. If they tell you it's gonna take nine months, put 12 months in your feaso or 15 months.
You gotta make sure. Time kills all deals. Mm. So you, you've really got to, um, make sure. But that you've got enough time in your, in your feaso and you calculate the interest over that time. But like, like a, we had a 34 one-bedroom units on the Gold Coast that just got approved in three months because they want to see development.
They're pretty, um, proactive as long as you- Yeah, that's great ... got the, the right site. So that, that was pretty quick. And that was just a code assessable DA- Mm ... and we were able to respond to the, um, to their questions within a week. There wasn't anything too clunky. And then we've got code as- um, impact DAs where we've got to go to public notification, we've got to respond to all the people that have got objections to the DA, and it's a, it's a longer process.
Um, so you know, we've got one at the moment where that's going to take probably eight to nine months, so for an impact DA. Mm. So it just depends where you are. But once again, your, your planners will be able to give you a reasonably accurate timeframe. Mm. But yeah, you got to, uh... We, and then we're doing a rezoning at the moment as well, which will probably take a couple years down in, in Lismore.
So it just depends what you're doing. But, um, yeah, for the, for the most part, if you're dealing in the right councils that are, that want to see development, you know, it c- it can be, you know, uh, for code assessable DA under six months
Yeah, fantastic. So when you, when viewers that are not involved with land subdivisions or property development, I mean, I think it'd be pretty fair to say that what you do with getting this DA uplift is in some cases, if you're not doing the ground-up construction, you're basically a middleman that's removing the approval risk from a council.
Is, isn't that what you're doing? You're basically just removing the risk.
Mm.
And by spending all that time, if, if some other buyer is the, is a builder who wants to, um, immediately build houses on that site, if you've already spent all that time removing that risk, that's- Mm ... the value that you're adding for that end buyer, isn't it?
Yeah. A, a lot of developers won't buy sites that, uh, have that, uh, approval risk. They've been burnt before where they haven't got the approval and things have gone against them. And some of them- Yeah ... they just got a straight out policy, they'll only buy approved sites. So it creates opportunities for people like you and me can, to go out there and have the vision, uh, take the, take on the risk.
But like I said, we, we have long due diligence periods, we have long settlements.
Mm.
Uh, on most, on probably half of our, um, DAs we've actually had approval before we've settled on the site. So once again, uh, we've done it out of options so we can flick on the site- Mm ... you know, even without ev- ever owning it.
So there's ways to de-risk that. Like we, we did one recently where we looked at it and went, you know, our due diligence period is not gonna be enough to give our, to, to just go have a pre-lodgement meeting and get the answer. We actually said to the vendors, "We'll, we'll buy it off you, but we want a, like seven months due diligence period."
We're actually gonna physically lodge the DA, get the, you know, um, what's it called, a request for information back from council where they'll kinda show their hand of like these are all the issues that we see. We had the engineers on site, we had the ecologists out on site, had their planner out on site, and we've w- walked, um, discussed through the site to a place where we're comfortable that there's a solution for all those problems and, and you get a pretty good feel at that point.
Whereas if we'd just gone and had the council meeting, they would've just quoted the book back to us and we wouldn't have got any answers that would've given us the comfort to, for quite a big purchase to actually go unconditional. So, um, yeah, that, that DD piece, yes, you're taking on the risk of the DA, but you can still de-risk it through due diligence and- Mm
and longer settlement timeframes.
Carson, the way I see it, um, uh, the, the reason why this is such an exciting business model and the, the reason there's so much uplift creating these paper lots, one is you're de-risking it, you're getting the approval so the builder doesn't have to worry about whether they can get it.
Mm.
But secondly, structurally, um, you're getting a big uplift because all of a sudden once you have that approval, it becomes so much easier for someone to borrow money to buy the site.
Mm.
Because yes, you can subdivide this into 20 lots. Yes, you can build 20 houses on it. So all of a sudden, before some big chunk of land that you don't know what you can build on, a bank will do their own due dil and say, "I'm not lending you money on that."
Yeah. But once you get that approval, it becomes so much easier to get finance on it.
Yeah, 100%. Like banks, their, their LVRs for a vacant piece of dirt sometimes 50 60%, so you're, you're chucking in half or 40% of the purchase price, plus your cost to get in to, to, to buy this thing because the risk is so much higher.
As soon as you've got that approval, depending on what the margin is, they can- Mm ... you can leverage so much higher into your 70s, and we've, we've had, um, sites where we've put in less than, like, 7% of the total development cost. So once again, that approval, as long as you've got plenty of margin in the deal-
Mm
um, you can, you can leverage it so much higher. So, yeah.
And just confirming with the viewers, like, you have actually sold out at this rung two in the ladder on several occasions and decided not to go and do the civils and connect utilities?
Yeah. Like, we've done a little duplex, um, flip. We, we flipped a three lot, three lotter up in Brisbane.
Um, we flipped our 14 lotter in, in Maudsland. You know, I think we- that one we paid, uh, 930 for the site and we flicked it on for two and a half. You know, there's, there's good margin in- Mm ... getting approval and flicking on. Even some of those smaller ones, I think we paid, like, 930 for the one in Brisbane.
We sold it for 1.4. We, we might have spent 70, $80,000 on the, on the approvals and a bit of holding cost, but it's, it's good money. You're still making your 30% margin. You're not taking on all that risk, and we looked at that one, had a lot of slope. Like, we knew to build the, um, the road, we had to do all these root protection side of things.
Little things that, it just adds up, you know. And we knew there was gonna be delays and, you know, the, the site, it ended up taking 18 months before they broke ground as they worked through all those solutions. And we could see the writing on the wall, like, "Okay, we're happy to just, you know, not be greedy, take the margin here."
We, the, I'll always back myself in to find another project and, you know. Especially early days, I think you can't go broke making a profit, as they say. So, you know, I, I think it can be enticing to, you see that big number, "Oh, let's just develop it," but you just gotta weigh up what your risk profile is and, and what you've got capacity to actually do.
So- Mm ... um, we, you know, we had another site in, um, that we ended up developing, and we actually went to our JV party and said, "Look, we've paid 1.375 for the site. We've just been offered 2.2 for a little eight lot, sorry, an eight lotter in Jacobs Well- Uh, do you wanna... I think we should just flick it and make the easy money."
And they were like, "Eh, we wanna go through with the development." And, and so we went through with it. But- Mm ... you know, we had the option. That's what I like about the subdivisions. You've got options now to, to, to exit at that level, you know? Mm. So that's if you're doing profitable subdivisions, um, then you're gonna get that uplift, where sometimes in the built form, if it's like, like I said, just a 20% margin or 15% margin, and you don't necessarily have that option to ex- you actually have to go through with the whole development to, uh, to, to get any profit.
So, uh, yeah, I, I love, you know, having those multiple exit strategies. It helps me sleep at night. So, um, yeah, I, I think the DA flip is a, is a great strategy and one that probably, um, people should consider. I know people that that's all they do.
Yeah.
And they make really good money, and they've got no intentions to develop anything ever.
Mm.
So, yeah.
One of the reasons why I think you're probably a very good mentor in this regard is that you've actually made a mistake, uh, in one of your earlier projects where you did decide to build. Mm. And at the end of it when you sold, you just c- come to the conclusion that, "Gee, I wish we didn't go- Yeah
the full Monty. I wish we had have just flicked it at the DA uplift level." And-
Yeah ...
those sorta those periods of time where you've spent a year doing something and you think, "Wow, that wasn't, just wasn't worth it," that's what helps you assess deals later down the track and maybe give better advice to some of your students, 'cause you've made those mistakes.
Yeah. Well, I had a, did some education early and they were like, "You gotta build your portfolio. Don't sell anything. Just, just sell what you need to and keep." So I had that mentality. I was like, "Okay, we're gonna keep everything that we can afford to keep." So we, uh, we built a coup- couple of houses and I, okay,
we actually, it was, it was on three titles. We separated the titles and made, like, an instant $150,000 uplift, and then we built the houses and they were only worth what the build cost was there to- This was like
a year later, wasn't
it? Yeah, it was like 18 months later. So it was like- Mm-hmm ... and, and it was the opportunity cost of taking that money and going and doing other projects.
And yes, I'm all for, you know, I don't want to be chasing the next deal all the time or, like, we plan on building a portfolio. It's just at the moment we've had really good deals to roll into, and making chunks of cash is really hard, so if you've got a good profitable project, I, I'd rather do that and then go buy a high-yielding commercial property or, or something else.
But, um, yeah, in that instance, if I was coaching myself again, I would've just said, "Look, sell those vacant lots, take the cash because, yes, you're gonna..." You know, in hindsight we learnt a lot through that process so it wasn't, um, it wasn't all lost, but I think there's, there's smarter ways of doing it. And it's not to say that building isn't, because I see, I got a lot of friends that that's all they do is duplexes and high-end builds and, uh, I think in the, in the right market and the right product it makes sense to build on it.
Some- especially if you're in a rising market and you stay in the deal for a bit longer.
Yep.
But once again, you just gotta zoom out and kinda make sure you're assessing it properly and j- don't build for the sake of, "Hey, we've gotta put a house on this piece of dirt."
Yeah. So. That's great advice. Mm-hmm.
Carson, let's go to rung three in the property development value ladder, and let's just call this, uh, finished lots.
Mm-hmm.
Where you've not just got the paper lots from a DA uplift, but you've actually gone out there and you've graded all the land, you've cleared all the trees, you've built the roads, you've connected all the utilities and- Mm-hmm
saved the builders, uh, who might be the end, uh, purchasers a lot more time- Yeah ... you know, a lot more money. Let's talk us through that project and, um- Talk to us about, like your, one of your, um, uh, value adds, I guess, is that your business partner is actually in civils. Mm. Like, that must be a massive sleep at night factor for you- Mm
because knowing that you can actually deliver in this rung three so efficiently- Mm ... because you've got someone on your team, that, that's his, that's his skillset.
Yeah. Oh, it's, it's a huge advantage and, um, yeah, it, which, which is great. But like I say to our coaching clients that don't have a, a Shannon, is, "Hey, most developers don't have an in-house civil arm."
Mm. "
So you just need to find a really good engineer that can, um, hold your hand, help cost things along the way, and then tender it out." Like at the moment we're getting to the s- stage where we can't, don't have capacity because we don't want to build a big civil k- um, company. Uh, Shannon can do a couple of projects and we're gonna, we're tendering that out.
So we've got our engineers tender it out to three different groups, and we're meeting with those civil contractors to, to go through that process. But yeah, there's no doubt that going through with the full development, you're gonna make the most amount of money, um, because you've, you've take, you're doing, taking on all the risk.
And yeah, like subdivisions, if they're done right, typically have a lot more profit margins in them than a lot of the, um, built form side of things that you can do. Like a lot of feasos, talking to a lot of agents and even our financiers, I'm always asking them like, "W- what are people making? What are the margins?
You know, what are banks lending on?" And you know, there's n- not a lot of really, really profitable deals going out there. There's always that amazing deal out there, but-
Mm ...
subdivisions because the, the actual construction piece is so much less, you know, if you're doing a townhouse, it might be, you know 250, 300, $400,000 per, per townie to do as opposed to your civils might only be 70, 80 up to, you know, $200,000.
So it's, it's just a lot less, you know, to exit and we're still selling, you know, blocks in the, you know, acreage blocks out in Logan still selling for 900,000. Um, land's in, in such high demand because of all the red and tape. If you can actually- Mm ... get through it, it's, uh, it's pretty scarce. So it's, it's a, uh...
I like to do stuff that's, um, uh, unique as well. So it's not just in the urban sprawl, the, the same 400 square meter cookie cutter block where you're playing with the, the big end of town. It's just a race to the bottom because they've, they've been land banking on that site for 15 years. Yeah. They've got the economy of scale I don't have.
Whereas if I can get a little, you know, um, site that's, uh, in a built up area or we do... That's why we like the acreage product because that's a different product type that's quite scarce. Yeah. I don't have the risk of another 100 lots opening up next to me and, and, and the market turns a little bit and they'll just beat me on price.
So if you've got a bit of a unique product, then it kind of helps insulate a little bit of that risk as well.
Yeah. So. I think from an outside in perspective, I think one of the reasons why you can add a lot of value in this rung three of the, the, the ladder is that if there's builders out there that have 40 or 50 staff on their payroll and they finished another project, you go along to them, you put your property on the market as a finished lot, it's all ready to go.
Mm.
They, they, they've just saved 18 months of their time and they're paying wages every week to these 40 or 50 staff. They can come to you, "Oh, yeah, we, we can start tomorrow. We can start building straight away."
Yep.
Um, we got our, we got the capacity now we finished this other project. You're always gonna be able to get a little bit of a premium for that site because you have deri- de-risked it-
Mm
and you've got, got it shovel ready where it's ready to build on straight away.
Yeah, it depends what your product type is. If you, if you're selling that, you know, 400 square meter block, you, you- Mm ... you open yourself up to the investor channels, you got builders that will take those blocks, and you got own occupiers.
Mm. You know, when, if you're doing acreage, you kind of... Builders will very rarely do speckies- Mm ... on, on, on that side of things. They won't necessarily take the risk unless, unless it's like a luxury product where they'll try and hope to get some uplift like here on- Bonogan at the moment, there's builders that are buying one acre blocks, spending two and a half on the builds, and then selling them for five and a half plus and making really good margins.
Whereas, you know, the, at the, at the lower end, you know, those investment channels, especially the last two years, have just been flying out the door. Mm-hmm. You know, like I know, um, aggregators that are literally just getting a block, putting it under contract, finding a builder, packaging it up, and making 40, 50 grand clip just because they're just facilitating that- Yeah, yeah
and it's just flying out the door. So yes, y- when, when you do the end product and it's ready, you know, shovel ready for the, for the guys to come in and- Mm ... like I said, and mum, dads, they're busy. You know, like they just want something that's flat, nice and easy that 99% of builders can build on. If you're delivering that to them and then yeah, it's, as, as, as price right, it's, it's gonna move.
Okay, and as, as a mentor if one of your students came along, Carson, and they've successfully, uh, done a 20 or 30 lot subdivision, say the smaller blocks, you know, 500 or 600 square meter blocks of land-
Mm ...
um, approved for house and land packages. If they had an offer from one builder to take all 20 or 30 lots, and that offer might be three or 400 grand less than hanging around for another year and selling all 20 or 30 to mum and dad investors.
Mm.
How would you process that before giving them advice as to, "Yeah, take a lower amount now, but save the next 18 years of your life and all that hassle-" Mm ... trying to sell them off one lot at a time"?
Mm.
How, how do you think about that as a, as a, as a mentor?
It, it, it sounds really attractive, but the only problem with, a lot of people don't realise when you sell it all to one builder, is the banks sometimes have an issue if it's just one builder, because then there's the risk of if that builder goes belly up, all of those pre-sales are gone.
So y- they, they'll look at it, whereas, you know, a lot of builders they'll put and call them, and then during the, um, the settlement period, they will then put them into other people's names, which then kind of de-risk, 'cause then you've got f- even though the builders guarantee that they're gonna settle on them, if they can't find a, a buyer, hopefully during that process before you go to the land, you can get other...
You know, they've passed them on to, you know, the incoming investor, and that de-risks it. But sometimes there is the risk of one builder. But yeah, if you've got a really solid builder or a little really solid, um, uh, buyer coming in, taking out all the blocks, and the banks are happy with it and you're happy with the, the risk of, you know, them executing, then yeah, I would take the less money because it's, it's, you live to fight another day.
You're gonna, you know, you could... 'Cause it's hard at the moment because the market's just been going like that- Yeah ... until recently, whereas- Yeah ... it's, it's, it's softened. So a lot of people just think that that's normal. Mm. That's not normal. Sometimes the market does go the other way, and we've been in s- some of those tight markets before and I was living in Byron Bay when the GFC hit, and we had half price sales around the place as well, so that's always at the front of my mind.
It's always that, um, that sales risk. So yeah, if you can, if you can make a profit, then yeah, happy days. So you, you wanna be really bullish, uh, or you've got to have the capacity to hold if, you know, if you're gonna try and play that long game. And sometimes that makes sense in a rising market, but once again, especially early days, if you've got a project and you've got someone that's gonna take it out and it, it's appropriate, then yeah, I'd, I'd take that every day of the week.
So.
Okay, Carson, so rung four in the property development value ladder, uh, is Roundup Construction and you're now doing this in a project in Upper Coomera, so-
Yep ...
um, actually building the apartments. Um- Mm ... tell us y- your thought process. Is this just a natural evolution of selling so many other sites and seeing other developers maybe making money by building?
Mm. Or is it more an evolution where you actually wanna build and hold for yourself some of the stock?
Uh, to be honest, once again, I'm pretty unemotional about development. It was just, it just worked. W- It was one of those projects where, uh, it was a one-acre site, medium density on the Gold Coast. We bought it really well, just over a million dollars for the site, which is pretty cheap.
Had a bit of slope on it, so scared off a few buyers. Uh, but once again, we got 34 one-bedders. We're, we're, we're taking a, delivering an affordable product. Uh, and like I said earlier, it's in a Uh, it's got a yield that w- works for investors as well, so we're moving that all through channels. So we're paying basically double the, the comms that you'd pay a normal agent.
But they sell it all off market and move it through, um, their investor channels, and it's quite easy, um, process. So we can get our pre-sales at the very least, and then we can go to market with the rest of it if we want to. Um, but yeah, that built form for me, it's, it's not that, "Okay, we've, we've done land, we're moving into built form."
It's just the project made sense. And the thing I liked about that one, it was a big enough piece of dirt. I actually bought it as a, uh, a six-lot community title subdivision, so I knew that I had a nice exit there if, you know, I got the approval and I priced it, and then the, the builds went through the roof.
I had another exit at a 30% margin to, to go back and do the subdivision. So I liked that I had, you know, multiple exits on that one. Uh, but yeah, I've got another mentor where he was like, "Why are you just selling the dirt? Why are you not putting houses on these things?" He's like, "Package them up, go find a builder, and they'll give you 30, 40%, uh, 30 to 40 grand comms just by putting in the builder and then you just facilitating that sale, and then you make, you know, times another 10, 20 blocks.
There's another, you know, 800 grand there." I had a coaching client that were actually about to go through a, uh, a, um, to, to, to market for an agent, and we'll put him in contact with a builder. And instead of them giving him the comms, they just paid a, a premium and, uh, so no agent fees, and they managed to, to move it all through builder.
So yeah, there's different ways to do it. That built form sometimes, once again, it makes sense. There's a lot of, um, there's a couple of builders, uh, developers, and they do that model, and they do really, really well. I just don't wanna get into the, the seven-year warranty risk of construction and it's just, it takes a lot more capital.
Yeah. Like when you look at your fee zone, you're like- Absolutely ... "Oh geez, this, this looks great," but then you look at the amount of capital you've got to put in, it's like, okay.
Mm-hmm.
That's a, that's a lot of dough, you know?
That, that's why I, I just think it's so smart to at least have a crack at that rung two where you're getting the DA uplift because- Mm
um, you don't have to build, you don't have... And you know, a lot of times I'm working on sites now where I'm doing that, and I definitely don't have the money to actually go and build, but-
Mm ...
I have the option, like most of these approvals will be for like four years or something.
Yep.
Even if I don't have the money now, I can just sit on it, and maybe in three or four years I'll have the money.
Mm. Or I can sell it now to someone else who does have the money, and I just love that business model up the rung two.
Yeah.
Um, it, it, it's just such a great idea. They're the four rungs I see, um, in the property development value ladder. Um, you're, fair to say, you, you, you're involved with all four of those rungs.
Do you have a preference, Carson?
I do just like the, the land, like developing all the way through. I mean, don't get me wrong, one of our best deals was literally just, I didn't even get the DA. Sometimes it was, I literally just secured the site, did some of the due diligence, and passed it on to a-
Mm ...
a developer and, and basically got 10 times my carpet cleaning wage in, you know, yearly wage in a two-month period, which is phenomenal.
So I think that, um If you get really good at acquisitions for, for return on investment, there's nothing compares to that, you know, just finding the deal and passing it on. But I, I, like I said, I, I actually generally get a kick out of getting the end product, especially the acreage. I really enjoy... Maybe it's because of my, um, country background, I like the, the bigger blocks and I, so I actually get a kick out of selling them and meeting the owners and-
Mm
seeing them, you know, enjoying it with their family. Like, you know, we, we just had an old strawberry farm that sat vacant for 15 years, and to see, you know, um, all the families there moving into their new homes right now, it's, it's, it's a pretty rewarding process, not just financially, but, you know, I, I get a real kick to, you know, s- work through the process and then see the end product.
It's, um, it's a pretty rewarding job, which is pretty cool, so.
Yeah, right.
Mm.
Now, before we finish the podcast, Carson, I just wanna talk about something that, like, you don't hear ab- on social media, and that is, um, the opportunity that comes up every now and then. It's not very common for a developer to go and buy what I call a, a broken lot, where a developer's gone broke- Mm-hmm
usually for some sort of financing problem or the market's gone down, and they've just, all the subcontractors have just picked up their gear and left. And some time later, maybe six months later, you see a mortgagee in possession sign of this subdivision site that-
Mm ...
hasn't been finished. Or, uh, recently in Lennanburg Street, Southport, there was a high-rise building, building there that was, like, 90 or 80% finished and the developer went broke and same thing, mortgagee in possession.
And I went out and had a chat to a mate of mine, John Facer, and said, "Oh, you know, do you think there's any value in taking over this high-rise building?" And he said, "Oh, yeah, there, there probably is at the right price, but these subcontractors, when they don't get paid, they can get pretty, uh, angry, and they can, they can pour concrete down the pipes," and you just never know what you're inheriting if you wanna take on a project like that.
So have you got any stories in that regard, Carson, that you've heard of?
Yeah. We got the built form version, which we'll get to, but even on a, on a, um, land subdivision we've, uh, haven't actually picked up one, but I've known some developers that did one last year out in Ipswich, and they bought a site. And the developer that was going under said, "Yes, I've done all the bulk earthworks," which is kind of, you know, getting all the grades level and getting all the compaction so then you can go in and build the roads, like it's all done.
They went belly up when the, when the developer come in, they realised there was a lot of uncontrolled fill. So when you, when you bring in fill or you've moved dirt around on site and you haven't compacted it properly under level one, um, certification where you've got the geotech signing off on it, then, uh, sometimes you've got to, uh, you've got to re-compact it and relay it and do all that work.
And if you've, you know, factored your numbers in that that's all done- Mm ... that can be a risk. You hope- you can do a lot of geotech and, um, and work that out. But a lot of times things can still get, get missed. Another one is like a, a asbestos if it gets through the dirt. Like, we had a site, um, that strawberry farm I was just telling you about.
A lot of people just illegally... When you've got land banking sites that we, we bought this off, a lot of people just dump stuff on it because it's been sitting there vacant. So you get, start getting, um, asbestos mixed through it, and especially if it gets into the dirt and you've got to tip the dirt, um, or, or I've had asbestos bonded to concrete before.
It gets really expensive really quick. When you're not just asbest- you know, tipping out a, an, an asbestos, right, you've got dirt mixed into it or concrete mixed into it, like it's, it gets really expensive. So yes, there's always risk buying a site off a, off a developer. Um, I was speaking to someone recently, they had an o- old car body underneath one of the sites and, you know, once again, there's all those issues.
But, uh, because when the geotech's doing their drills, they might do six or seven. Like, if the site's quite big, th- they're not gonna hit every single spot. Mm-hmm. So there's always that risk, which is why you need that contingency. And then in the built form, yeah, like we had a crack at one literally, you know, a, a five-minute walk from here, um, during COVID and, uh, there were some issues with the developers, um, issues with the council sign off.
So it sat there basically, I think it was 100% or 90% built at the time, and then it sat vacant for 15 years and never got the final sign off. So then it had all these waterproofing issues and, uh, when, uh, council finally said, "Okay, yes, it's, uh- It's in a illegal dwelling. Uh, there was still all these issues and it was like, like walls were caving in, there was mold issues through it and it's like, yeah, you, you gotta buy it well, you know?
Yeah. So it's one of those things or, you know, if it's a, a new product where, like what you were talking about, that one in Southport, once again, you've just gotta factor in the margin because you gotta, you gotta really work closely with the old certifier and make sure that you know what's actually been signed off, what's been done.
What if
he doesn't want to take the job?
Well, you, you gotta, you, you better make sure your certifier's all over it- Yeah ... and, and you've got a really clear pathway-
Mm ...
to what can be signed off. 'Cause you're right, you know, contractors can do all sorts of funny things and- Mm ... you know, uh, unfortunately, I, I, I had a friend of mine that literally lost their business 'cause they didn't get paid as a, as a, um, as a brickie and, um- Wow
from a builder going bust. So this understandably ruins a lot of families, the flow on effect of these things happening, so a lot of people get upset and, um, yeah, things happen on site. So yeah, you wanna go in eyes wide open and if you're gonna pick something up that's got, you know, like I said, we preach buy stuff that have got warts on it, but there's still a line where, you know- Mm
you gotta make sure you've got, um, you can- Handle the worst case scenario is kind of how we approach it. Can we handle the worst case scenario? No. We had a site recently, we're like, "Geez, this is such a good site." And we're like, "Well, or, or extending a little bit," or like, "Can we handle the worst case scenario if, like, things get delayed or this issue happens?"
We're like, "Probably not, so let's do it as a joint venture." And then, you know, they, they got the capacity to hold it and- Mm ... w- you know, there's probably a 95% chance that that would've been totally fine, but once again, if you can't handle the worst case scenario, don't do it. You know, just play the long game and you'll be fine, so.
It's real- I just f- uh, it just triggered my, um, subconscious there when you talked about that compacting stuff because I'm looking at an industrial subdivision site at the moment, and one of the reasons I really liked it is there's already a massive road through the middle of this thing and I thought, "Wow, the road's already done."
And I was really... I got educated again when I spoke to the council there on a Zoom call, and he actually said, "Oh, Andrew, you'll probably have to rip that road up." Mm. I thought, "What?" You know, I thought, "That, that's one of the reasons why I thought it was such a great site, the road's already there." He said, "Oh, no, you'd need to have the certifiers in there to make sure that it's been compacted underneath there sufficient for these big road trains to actually- Mm.
Yeah ... go on there." So that again, like, it's just a perfect example of what you mentioned before, where there's so many things you've got to think about with your due diligence.
Yeah. That's why some roads have been built for a small amount of traffic, and if you're change- changing the use, then it's got to be a different thickness, it's got to have, you know, different, you know, uh, uh, gravel and things underneath.
So yeah, y- there's a lot, there's a lot of moving parts, which is... But the best thing about development, there's an expert in every area. And if you don't know, you can employ a, a good engineer or a project manager and r- you know, wrap a team around yourself. If there's enough margin in the deal, uh, you can...
You know, there's a, there's someone that can hold your hand or you can, you know, buy someone's time that's got the experience, and that's what I love about this game. You know, you don't need any qualifications to be a developer, but you better have a really good team that have done what you're trying to do.
And if you can, you know, basically we're just orchestrators of, of the project and just nudging it along and, you know, there's really people a lot smarter than me that are, uh, doing all the other bits, which is good.
It's, it's interesting, Carson. Um, I found out a little while ago that you don't even need qualifications to be a town planner.
Did you know that?
Don't you? No. Oh, I thought you did.
No, you don't need to have qualifications to call yourself a town planner, but- Yeah, right ... you'd wanna make sure that the one you're using does have qualifications, but-
Yeah, right. There you go ... there you go. Well, yeah, you can definitely lodge your own stuff.
I know people that have lodged their own, you know, approvals and bits and pieces, so I think if it ticks the boxes and, yeah.
I think that's why some surveyors actually- Yeah,
they do ...
on their signage in their front door say town planning and surveying. Mm. Because they're qualified surveyors, but you don't actually need town...
My understanding is you don't need town planning qualifications to call yourself a town planner, so there you go.
Yeah. Well, there you go. Learn something every day.
Thanks for listening to part two with Carson Bolt, uh, the masterclass in land subdivision. We're gonna come back for part three shortly, and we're gonna talk about five reasons why you should walk away from a subdivision lot.
Thanks, Carson.
Pleasure, Amos.
Thanks for listening to the Andrew Right Property Podcast. This is all about building a community of like-minded investors who can share real-life stories, experiences, and collaborate with a view to helping each other. Join us. Get in touch through the link in the show notes. I look forward to you joining me on the next episode.
Once you have that approval, it becomes so much easier for someone to borrow money to buy the site.
Most developers don't have an in-house civil arm.
Mm.
So you just need to find a really good engineer that can, um, hold your hand, help cost things along the way.
That's what helps you assess deals later down the track, and maybe give better advice to some of your students, 'cause you've made those mistakes.
You know, you don't need any qualifications to be a developer, but you better have a really good team that have done what you're trying to do.
You don't even need qualifications to be a town planner.
Did you know that?
Don't you? No. I, I thought you did.
No, you don't need to have qualifications to call yourself a town planner, but
Hi, I'm Andrew Wright, principal of Professional Southport, and this is the Andrew Wright Property Podcast. I've built a multi-million dollar property portfolio, delivering a seven-figure annual rental income, and led my real estate team through thousands of sale and lease transactions. In each episode, I share real deals and strategies that will help you find, fund, and operate profitable property deals.
The aim of this show is to provide education and build a community of like-minded investors who can collaborate, share insights, and help each other in each other's journeys. You can make excuses or you can make money, but you can't do both. So come and join us
Welcome back to the Andrew Wright Property Podcast, and today we're going to part two of the Land Subdivision Master class with, uh, developer and mentor, Carson Boldt. Carson-
Thanks again ... how you going, mate? Good, good. Had a couple- Could be ... minutes break. We're ready to go into part two. Ready to roll. Today in part two of the Land Subdivision Master class, we're going to talk about the, I call it the property development value ladder. Four different rungs, and as you go through the land div- land subdivision process or land investing business, there are different little milestones that you can reach, and at each milestone you have the...
You can sit down and say, "Okay, well, do we wanna sell? Um, does it make more sense to sell now or are we gonna go onto the next step?" And there's no more expert that I know than Carson in analyzing each step of the process, so we're gonna go through this four rungs of the ladder, and the first one is just simply, uh, buying a site that is in the path of progress where you believe that the, the land's gonna be worth a lot more down the track to subdivide.
And, um, Carson's a very active sort of developer. I'd imagine that's not one of your main strategies, Carson. Is that fair to say?
So that's the w- what's-
Land banking ...
land banking. Raw land- Yeah. Oh, yes ... just
buying
raw
land and-
No, I, I'm not a land banker, so a lot of agents that ring us, I'm just like, "I, I don't wanna speculate on the property market."
Mm. So, and that's fine if you've just got swaths of cash and you wanna just gamble. Unless I've got... I would only do it if I had some inside information that, you know, in, in a year or two- Town plan ... it's gonna be rezoned or, you know- Yeah ... and if I kn- had, like, a lot of confidence that that was gonna happen, I, I may do it because it's no different than getting a DA for 18 months than getting an uplift if I knew.
But a lot of land bankers have got a different approach. They're waiting, you know, long periods of time, and that's... I, I just wanna get in and get out, and 'cause I'm using private money for, for the most part, I've, I've only got a, at the most, a two-year window where I've gotta-
Mm ...
get some uplift. Um, otherwise I need to refinance out.
So yeah, land banking, we're just not at that level yet where we're looking at that at
all. Yeah, you've hit a, hit on a couple of things there. I mean, one of the disadvantages of that particular strategy, it's so hard to get money, uh, from a bank to finance land that doesn't generate any income-
Mm
particularly, uh, if it's rurally zoned. And my understanding, check with your accountant also, is that, uh, you, you know, you can't negatively gear a vacant block of land if there's no income. The tax law says that you can claim a deduction on this interest cost if it's incurred in the process of generating, uh, taxable income.
So that interest cost just goes to the cost base, which, uh, you know, there's a lot of downsides, uh, to land banking. And if you're buying rural hoping that it'll get rezoned at some stage, well, it could be a pretty long wait.
You wanna be sure, 'cause I've paid my land tax bills recently and it's- And land tax
it's not, it's not much fun. So, you know.
Put some cows on there and call it primary production for the, uh land tax exemption.
That's right. 100%.
So- Okay, so getting onto the more exciting stuff for Carson, um, we're gonna talk about the DA uplift, and this is such a big business, uh, model for a lot of developers who only go to this second rung in the property development value ladder, and that is getting a DA uplift.
And I, I call them paper lots, so it's basically just, uh, improving land to get approval to build lots, and then you can sit down and decide whether you're gonna flick it or whether it makes sense to, um, go a step further.
Mm.
Can you talk us through that value, uh, uplift. And in your experience, like, are you able to sort of say, "Well, this is the, the section in the, the four rungs of the ladder that adds the most value," or not necessarily in all cases based on your experience, Carson?
Um, not in all cases, but it's probably the one that you can get the quickest uplift with the least amount of work and risk. Uh, but I think fundamentally you need to be looking at it through the lens that the next person coming in has to make a margin, especially if we're talking bigger projects where you're gonna get the most uplift.
The banks aren't stupid. They, they're gonna, like, at a bare minimum, they're not gonna fund stuff unless there's a 15% margin, and the bigger the project, it's gonna need to be probably 20% plus. Mm. So if you're... A lot of people say, "I'm gonna go do a flip," and I look at the feaso, and they've got it running at a 20% margin.
If you get the approval, that's what the next person needs to make. There's no uplift. You need to, the feaso needs to save 30 or 40% margin so that you can take that 10, 20% clip, and then the developer coming in still makes a margin as well. So I will, I do tend to find, uh, we've sold a lot of sites where we're like, "Ugh, there's actually not a lot in this.
Let's just, uh, test the market at a higher number, and if we get that, it's not worth the risk of doing the development." And I'm surprised at how many people, once again, that are happy to land bank or they're just happy with skinnier margins. Mm. They might have a really big balance sheet, and they don't need to go through the banks to finance the development.
So we've, uh, sold a couple of projects where I was like, "I've got no idea how they're making money." Like, I've done the numbers, and I probably know it better than them because I've worked on this thing for 15 months. Yeah. We've priced it within an inch of its life, and I've got the developer coming in making 5, 10% margins.
But once again, everyone's got different needs. Sometimes they're builders that can... They're like, "Well, I'm gonna make a, a margin on the build, and that's where I'm making my money. I'm just happy to plonk my guys on a site- Mm ... for, for 10, um, you know, for 12 months or whatever." And they, builders are good to sell to because they've, they've created a beast and they don't wanna lose their crew, and sometimes they've gotta keep them busy, and they just buy a site just to kinda keep the wheels turning over sometimes, so.
Uh, but you can't- If you're gonna go into it as a strategy, you would need to be really thinking about, um, the next person making margin, 'cause I see a lot of people get caught. They're like, "Oh, I've got a DA, it's worth more." Mm. Not necessarily. The, once again, if the person, next person co- coming in can't make a margin, then you're gonna struggle, so.
It's interesting you just said, uh, "Oh, I've got a DA, and now it's, the site's worth a lot of money," but it, it, I've seen some DAs where the DA has all these conditions that you need to comply with to actually sell the thing, and sometimes those conditions are so- Mm ... expensive to do that it's, there's just no money in it.
I've literally said to, uh, an agent before, I said, "Even if you gave me the, the block for free-
For free ...
I couldn't make this stack up- Yeah ... to, to do what is approved." Like, and we could- Mm ... do a different approval, or- Mm ... I need to wait for the sewer line to get a lot closer. You, you'll see it- Mm ... in Logan all the time, there's emerging communities, and they're like, "Yes, you can get 40 lots."
I was like, "Yeah, but a, a sewer's, like, two kilometers away." Yeah. "And I've got to... You just, it's not gonna stack up." So yeah, once again, you need to, um, yeah, be thinking about it a little bit- Mm ... a little bit harder. Uh-
So this process of adding value into these paper lots or this DA uplift to get approval to subdivide it, it takes time, and- Mm
you've done quite a few of these projects. What, what is the period of time from the sh- quickest example to one that's drawn out that you've experienced? Mm-hmm. And it may well be because of the constraints of the site or just dealing with different councils.
Yeah. Uh-
And inefficient town planners versus good town planners.
A-
and councils as well that are development friendly and, and not so much, like we've got- Oh, the extreme end at one end we had a fast-track DA for a four-lot subdivision in, uh, Logan, got approved in six weeks. And then here I am on the other side still waiting. Oh, we got, took us three and a half years to get an approval in Tweed Heads because they're just so clunky.
Wow.
There's no real statutory timeframes that they stick to. A lot of the developers there literally just wait, I think it's 37 days, and just lodge a deemed refusal and go straight to court. I was like, "Oh, no, I want to do the right thing. I'll work with council," and here we are, you know, bleeding on the, on interest trying to, you know, do the right thing.
But, you know, council are just so slow and clunky. And, uh, so yeah, you w- you want to know what councils you're going into, and once again, your town planners will know the councils that are bad, and they'll give you some reasonable timeframes. Add an extra 30% on top of that. If they tell you it's gonna take nine months, put 12 months in your feaso or 15 months.
You gotta make sure. Time kills all deals. Mm. So you, you've really got to, um, make sure. But that you've got enough time in your, in your feaso and you calculate the interest over that time. But like, like a, we had a 34 one-bedroom units on the Gold Coast that just got approved in three months because they want to see development.
They're pretty, um, proactive as long as you- Yeah, that's great ... got the, the right site. So that, that was pretty quick. And that was just a code assessable DA- Mm ... and we were able to respond to the, um, to their questions within a week. There wasn't anything too clunky. And then we've got code as- um, impact DAs where we've got to go to public notification, we've got to respond to all the people that have got objections to the DA, and it's a, it's a longer process.
Um, so you know, we've got one at the moment where that's going to take probably eight to nine months, so for an impact DA. Mm. So it just depends where you are. But once again, your, your planners will be able to give you a reasonably accurate timeframe. Mm. But yeah, you got to, uh... We, and then we're doing a rezoning at the moment as well, which will probably take a couple years down in, in Lismore.
So it just depends what you're doing. But, um, yeah, for the, for the most part, if you're dealing in the right councils that are, that want to see development, you know, it c- it can be, you know, uh, for code assessable DA under six months
Yeah, fantastic. So when you, when viewers that are not involved with land subdivisions or property development, I mean, I think it'd be pretty fair to say that what you do with getting this DA uplift is in some cases, if you're not doing the ground-up construction, you're basically a middleman that's removing the approval risk from a council.
Is, isn't that what you're doing? You're basically just removing the risk.
Mm.
And by spending all that time, if, if some other buyer is the, is a builder who wants to, um, immediately build houses on that site, if you've already spent all that time removing that risk, that's- Mm ... the value that you're adding for that end buyer, isn't it?
Yeah. A, a lot of developers won't buy sites that, uh, have that, uh, approval risk. They've been burnt before where they haven't got the approval and things have gone against them. And some of them- Yeah ... they just got a straight out policy, they'll only buy approved sites. So it creates opportunities for people like you and me can, to go out there and have the vision, uh, take the, take on the risk.
But like I said, we, we have long due diligence periods, we have long settlements.
Mm.
Uh, on most, on probably half of our, um, DAs we've actually had approval before we've settled on the site. So once again, uh, we've done it out of options so we can flick on the site- Mm ... you know, even without ev- ever owning it.
So there's ways to de-risk that. Like we, we did one recently where we looked at it and went, you know, our due diligence period is not gonna be enough to give our, to, to just go have a pre-lodgement meeting and get the answer. We actually said to the vendors, "We'll, we'll buy it off you, but we want a, like seven months due diligence period."
We're actually gonna physically lodge the DA, get the, you know, um, what's it called, a request for information back from council where they'll kinda show their hand of like these are all the issues that we see. We had the engineers on site, we had the ecologists out on site, had their planner out on site, and we've w- walked, um, discussed through the site to a place where we're comfortable that there's a solution for all those problems and, and you get a pretty good feel at that point.
Whereas if we'd just gone and had the council meeting, they would've just quoted the book back to us and we wouldn't have got any answers that would've given us the comfort to, for quite a big purchase to actually go unconditional. So, um, yeah, that, that DD piece, yes, you're taking on the risk of the DA, but you can still de-risk it through due diligence and- Mm
and longer settlement timeframes.
Carson, the way I see it, um, uh, the, the reason why this is such an exciting business model and the, the reason there's so much uplift creating these paper lots, one is you're de-risking it, you're getting the approval so the builder doesn't have to worry about whether they can get it.
Mm.
But secondly, structurally, um, you're getting a big uplift because all of a sudden once you have that approval, it becomes so much easier for someone to borrow money to buy the site.
Mm.
Because yes, you can subdivide this into 20 lots. Yes, you can build 20 houses on it. So all of a sudden, before some big chunk of land that you don't know what you can build on, a bank will do their own due dil and say, "I'm not lending you money on that."
Yeah. But once you get that approval, it becomes so much easier to get finance on it.
Yeah, 100%. Like banks, their, their LVRs for a vacant piece of dirt sometimes 50 60%, so you're, you're chucking in half or 40% of the purchase price, plus your cost to get in to, to, to buy this thing because the risk is so much higher.
As soon as you've got that approval, depending on what the margin is, they can- Mm ... you can leverage so much higher into your 70s, and we've, we've had, um, sites where we've put in less than, like, 7% of the total development cost. So once again, that approval, as long as you've got plenty of margin in the deal-
Mm
um, you can, you can leverage it so much higher. So, yeah.
And just confirming with the viewers, like, you have actually sold out at this rung two in the ladder on several occasions and decided not to go and do the civils and connect utilities?
Yeah. Like, we've done a little duplex, um, flip. We, we flipped a three lot, three lotter up in Brisbane.
Um, we flipped our 14 lotter in, in Maudsland. You know, I think we- that one we paid, uh, 930 for the site and we flicked it on for two and a half. You know, there's, there's good margin in- Mm ... getting approval and flicking on. Even some of those smaller ones, I think we paid, like, 930 for the one in Brisbane.
We sold it for 1.4. We, we might have spent 70, $80,000 on the, on the approvals and a bit of holding cost, but it's, it's good money. You're still making your 30% margin. You're not taking on all that risk, and we looked at that one, had a lot of slope. Like, we knew to build the, um, the road, we had to do all these root protection side of things.
Little things that, it just adds up, you know. And we knew there was gonna be delays and, you know, the, the site, it ended up taking 18 months before they broke ground as they worked through all those solutions. And we could see the writing on the wall, like, "Okay, we're happy to just, you know, not be greedy, take the margin here."
We, the, I'll always back myself in to find another project and, you know. Especially early days, I think you can't go broke making a profit, as they say. So, you know, I, I think it can be enticing to, you see that big number, "Oh, let's just develop it," but you just gotta weigh up what your risk profile is and, and what you've got capacity to actually do.
So- Mm ... um, we, you know, we had another site in, um, that we ended up developing, and we actually went to our JV party and said, "Look, we've paid 1.375 for the site. We've just been offered 2.2 for a little eight lot, sorry, an eight lotter in Jacobs Well- Uh, do you wanna... I think we should just flick it and make the easy money."
And they were like, "Eh, we wanna go through with the development." And, and so we went through with it. But- Mm ... you know, we had the option. That's what I like about the subdivisions. You've got options now to, to, to exit at that level, you know? Mm. So that's if you're doing profitable subdivisions, um, then you're gonna get that uplift, where sometimes in the built form, if it's like, like I said, just a 20% margin or 15% margin, and you don't necessarily have that option to ex- you actually have to go through with the whole development to, uh, to, to get any profit.
So, uh, yeah, I, I love, you know, having those multiple exit strategies. It helps me sleep at night. So, um, yeah, I, I think the DA flip is a, is a great strategy and one that probably, um, people should consider. I know people that that's all they do.
Yeah.
And they make really good money, and they've got no intentions to develop anything ever.
Mm.
So, yeah.
One of the reasons why I think you're probably a very good mentor in this regard is that you've actually made a mistake, uh, in one of your earlier projects where you did decide to build. Mm. And at the end of it when you sold, you just c- come to the conclusion that, "Gee, I wish we didn't go- Yeah
the full Monty. I wish we had have just flicked it at the DA uplift level." And-
Yeah ...
those sorta those periods of time where you've spent a year doing something and you think, "Wow, that wasn't, just wasn't worth it," that's what helps you assess deals later down the track and maybe give better advice to some of your students, 'cause you've made those mistakes.
Yeah. Well, I had a, did some education early and they were like, "You gotta build your portfolio. Don't sell anything. Just, just sell what you need to and keep." So I had that mentality. I was like, "Okay, we're gonna keep everything that we can afford to keep." So we, uh, we built a coup- couple of houses and I, okay,
we actually, it was, it was on three titles. We separated the titles and made, like, an instant $150,000 uplift, and then we built the houses and they were only worth what the build cost was there to- This was like
a year later, wasn't
it? Yeah, it was like 18 months later. So it was like- Mm-hmm ... and, and it was the opportunity cost of taking that money and going and doing other projects.
And yes, I'm all for, you know, I don't want to be chasing the next deal all the time or, like, we plan on building a portfolio. It's just at the moment we've had really good deals to roll into, and making chunks of cash is really hard, so if you've got a good profitable project, I, I'd rather do that and then go buy a high-yielding commercial property or, or something else.
But, um, yeah, in that instance, if I was coaching myself again, I would've just said, "Look, sell those vacant lots, take the cash because, yes, you're gonna..." You know, in hindsight we learnt a lot through that process so it wasn't, um, it wasn't all lost, but I think there's, there's smarter ways of doing it. And it's not to say that building isn't, because I see, I got a lot of friends that that's all they do is duplexes and high-end builds and, uh, I think in the, in the right market and the right product it makes sense to build on it.
Some- especially if you're in a rising market and you stay in the deal for a bit longer.
Yep.
But once again, you just gotta zoom out and kinda make sure you're assessing it properly and j- don't build for the sake of, "Hey, we've gotta put a house on this piece of dirt."
Yeah. So. That's great advice. Mm-hmm.
Carson, let's go to rung three in the property development value ladder, and let's just call this, uh, finished lots.
Mm-hmm.
Where you've not just got the paper lots from a DA uplift, but you've actually gone out there and you've graded all the land, you've cleared all the trees, you've built the roads, you've connected all the utilities and- Mm-hmm
saved the builders, uh, who might be the end, uh, purchasers a lot more time- Yeah ... you know, a lot more money. Let's talk us through that project and, um- Talk to us about, like your, one of your, um, uh, value adds, I guess, is that your business partner is actually in civils. Mm. Like, that must be a massive sleep at night factor for you- Mm
because knowing that you can actually deliver in this rung three so efficiently- Mm ... because you've got someone on your team, that, that's his, that's his skillset.
Yeah. Oh, it's, it's a huge advantage and, um, yeah, it, which, which is great. But like I say to our coaching clients that don't have a, a Shannon, is, "Hey, most developers don't have an in-house civil arm."
Mm. "
So you just need to find a really good engineer that can, um, hold your hand, help cost things along the way, and then tender it out." Like at the moment we're getting to the s- stage where we can't, don't have capacity because we don't want to build a big civil k- um, company. Uh, Shannon can do a couple of projects and we're gonna, we're tendering that out.
So we've got our engineers tender it out to three different groups, and we're meeting with those civil contractors to, to go through that process. But yeah, there's no doubt that going through with the full development, you're gonna make the most amount of money, um, because you've, you've take, you're doing, taking on all the risk.
And yeah, like subdivisions, if they're done right, typically have a lot more profit margins in them than a lot of the, um, built form side of things that you can do. Like a lot of feasos, talking to a lot of agents and even our financiers, I'm always asking them like, "W- what are people making? What are the margins?
You know, what are banks lending on?" And you know, there's n- not a lot of really, really profitable deals going out there. There's always that amazing deal out there, but-
Mm ...
subdivisions because the, the actual construction piece is so much less, you know, if you're doing a townhouse, it might be, you know 250, 300, $400,000 per, per townie to do as opposed to your civils might only be 70, 80 up to, you know, $200,000.
So it's, it's just a lot less, you know, to exit and we're still selling, you know, blocks in the, you know, acreage blocks out in Logan still selling for 900,000. Um, land's in, in such high demand because of all the red and tape. If you can actually- Mm ... get through it, it's, uh, it's pretty scarce. So it's, it's a, uh...
I like to do stuff that's, um, uh, unique as well. So it's not just in the urban sprawl, the, the same 400 square meter cookie cutter block where you're playing with the, the big end of town. It's just a race to the bottom because they've, they've been land banking on that site for 15 years. Yeah. They've got the economy of scale I don't have.
Whereas if I can get a little, you know, um, site that's, uh, in a built up area or we do... That's why we like the acreage product because that's a different product type that's quite scarce. Yeah. I don't have the risk of another 100 lots opening up next to me and, and, and the market turns a little bit and they'll just beat me on price.
So if you've got a bit of a unique product, then it kind of helps insulate a little bit of that risk as well.
Yeah. So. I think from an outside in perspective, I think one of the reasons why you can add a lot of value in this rung three of the, the, the ladder is that if there's builders out there that have 40 or 50 staff on their payroll and they finished another project, you go along to them, you put your property on the market as a finished lot, it's all ready to go.
Mm.
They, they, they've just saved 18 months of their time and they're paying wages every week to these 40 or 50 staff. They can come to you, "Oh, yeah, we, we can start tomorrow. We can start building straight away."
Yep.
Um, we got our, we got the capacity now we finished this other project. You're always gonna be able to get a little bit of a premium for that site because you have deri- de-risked it-
Mm
and you've got, got it shovel ready where it's ready to build on straight away.
Yeah, it depends what your product type is. If you, if you're selling that, you know, 400 square meter block, you, you- Mm ... you open yourself up to the investor channels, you got builders that will take those blocks, and you got own occupiers.
Mm. You know, when, if you're doing acreage, you kind of... Builders will very rarely do speckies- Mm ... on, on, on that side of things. They won't necessarily take the risk unless, unless it's like a luxury product where they'll try and hope to get some uplift like here on- Bonogan at the moment, there's builders that are buying one acre blocks, spending two and a half on the builds, and then selling them for five and a half plus and making really good margins.
Whereas, you know, the, at the, at the lower end, you know, those investment channels, especially the last two years, have just been flying out the door. Mm-hmm. You know, like I know, um, aggregators that are literally just getting a block, putting it under contract, finding a builder, packaging it up, and making 40, 50 grand clip just because they're just facilitating that- Yeah, yeah
and it's just flying out the door. So yes, y- when, when you do the end product and it's ready, you know, shovel ready for the, for the guys to come in and- Mm ... like I said, and mum, dads, they're busy. You know, like they just want something that's flat, nice and easy that 99% of builders can build on. If you're delivering that to them and then yeah, it's, as, as, as price right, it's, it's gonna move.
Okay, and as, as a mentor if one of your students came along, Carson, and they've successfully, uh, done a 20 or 30 lot subdivision, say the smaller blocks, you know, 500 or 600 square meter blocks of land-
Mm ...
um, approved for house and land packages. If they had an offer from one builder to take all 20 or 30 lots, and that offer might be three or 400 grand less than hanging around for another year and selling all 20 or 30 to mum and dad investors.
Mm.
How would you process that before giving them advice as to, "Yeah, take a lower amount now, but save the next 18 years of your life and all that hassle-" Mm ... trying to sell them off one lot at a time"?
Mm.
How, how do you think about that as a, as a, as a mentor?
It, it, it sounds really attractive, but the only problem with, a lot of people don't realise when you sell it all to one builder, is the banks sometimes have an issue if it's just one builder, because then there's the risk of if that builder goes belly up, all of those pre-sales are gone.
So y- they, they'll look at it, whereas, you know, a lot of builders they'll put and call them, and then during the, um, the settlement period, they will then put them into other people's names, which then kind of de-risk, 'cause then you've got f- even though the builders guarantee that they're gonna settle on them, if they can't find a, a buyer, hopefully during that process before you go to the land, you can get other...
You know, they've passed them on to, you know, the incoming investor, and that de-risks it. But sometimes there is the risk of one builder. But yeah, if you've got a really solid builder or a little really solid, um, uh, buyer coming in, taking out all the blocks, and the banks are happy with it and you're happy with the, the risk of, you know, them executing, then yeah, I would take the less money because it's, it's, you live to fight another day.
You're gonna, you know, you could... 'Cause it's hard at the moment because the market's just been going like that- Yeah ... until recently, whereas- Yeah ... it's, it's, it's softened. So a lot of people just think that that's normal. Mm. That's not normal. Sometimes the market does go the other way, and we've been in s- some of those tight markets before and I was living in Byron Bay when the GFC hit, and we had half price sales around the place as well, so that's always at the front of my mind.
It's always that, um, that sales risk. So yeah, if you can, if you can make a profit, then yeah, happy days. So you, you wanna be really bullish, uh, or you've got to have the capacity to hold if, you know, if you're gonna try and play that long game. And sometimes that makes sense in a rising market, but once again, especially early days, if you've got a project and you've got someone that's gonna take it out and it, it's appropriate, then yeah, I'd, I'd take that every day of the week.
So.
Okay, Carson, so rung four in the property development value ladder, uh, is Roundup Construction and you're now doing this in a project in Upper Coomera, so-
Yep ...
um, actually building the apartments. Um- Mm ... tell us y- your thought process. Is this just a natural evolution of selling so many other sites and seeing other developers maybe making money by building?
Mm. Or is it more an evolution where you actually wanna build and hold for yourself some of the stock?
Uh, to be honest, once again, I'm pretty unemotional about development. It was just, it just worked. W- It was one of those projects where, uh, it was a one-acre site, medium density on the Gold Coast. We bought it really well, just over a million dollars for the site, which is pretty cheap.
Had a bit of slope on it, so scared off a few buyers. Uh, but once again, we got 34 one-bedders. We're, we're, we're taking a, delivering an affordable product. Uh, and like I said earlier, it's in a Uh, it's got a yield that w- works for investors as well, so we're moving that all through channels. So we're paying basically double the, the comms that you'd pay a normal agent.
But they sell it all off market and move it through, um, their investor channels, and it's quite easy, um, process. So we can get our pre-sales at the very least, and then we can go to market with the rest of it if we want to. Um, but yeah, that built form for me, it's, it's not that, "Okay, we've, we've done land, we're moving into built form."
It's just the project made sense. And the thing I liked about that one, it was a big enough piece of dirt. I actually bought it as a, uh, a six-lot community title subdivision, so I knew that I had a nice exit there if, you know, I got the approval and I priced it, and then the, the builds went through the roof.
I had another exit at a 30% margin to, to go back and do the subdivision. So I liked that I had, you know, multiple exits on that one. Uh, but yeah, I've got another mentor where he was like, "Why are you just selling the dirt? Why are you not putting houses on these things?" He's like, "Package them up, go find a builder, and they'll give you 30, 40%, uh, 30 to 40 grand comms just by putting in the builder and then you just facilitating that sale, and then you make, you know, times another 10, 20 blocks.
There's another, you know, 800 grand there." I had a coaching client that were actually about to go through a, uh, a, um, to, to, to market for an agent, and we'll put him in contact with a builder. And instead of them giving him the comms, they just paid a, a premium and, uh, so no agent fees, and they managed to, to move it all through builder.
So yeah, there's different ways to do it. That built form sometimes, once again, it makes sense. There's a lot of, um, there's a couple of builders, uh, developers, and they do that model, and they do really, really well. I just don't wanna get into the, the seven-year warranty risk of construction and it's just, it takes a lot more capital.
Yeah. Like when you look at your fee zone, you're like- Absolutely ... "Oh geez, this, this looks great," but then you look at the amount of capital you've got to put in, it's like, okay.
Mm-hmm.
That's a, that's a lot of dough, you know?
That, that's why I, I just think it's so smart to at least have a crack at that rung two where you're getting the DA uplift because- Mm
um, you don't have to build, you don't have... And you know, a lot of times I'm working on sites now where I'm doing that, and I definitely don't have the money to actually go and build, but-
Mm ...
I have the option, like most of these approvals will be for like four years or something.
Yep.
Even if I don't have the money now, I can just sit on it, and maybe in three or four years I'll have the money.
Mm. Or I can sell it now to someone else who does have the money, and I just love that business model up the rung two.
Yeah.
Um, it, it, it's just such a great idea. They're the four rungs I see, um, in the property development value ladder. Um, you're, fair to say, you, you, you're involved with all four of those rungs.
Do you have a preference, Carson?
I do just like the, the land, like developing all the way through. I mean, don't get me wrong, one of our best deals was literally just, I didn't even get the DA. Sometimes it was, I literally just secured the site, did some of the due diligence, and passed it on to a-
Mm ...
a developer and, and basically got 10 times my carpet cleaning wage in, you know, yearly wage in a two-month period, which is phenomenal.
So I think that, um If you get really good at acquisitions for, for return on investment, there's nothing compares to that, you know, just finding the deal and passing it on. But I, I, like I said, I, I actually generally get a kick out of getting the end product, especially the acreage. I really enjoy... Maybe it's because of my, um, country background, I like the, the bigger blocks and I, so I actually get a kick out of selling them and meeting the owners and-
Mm
seeing them, you know, enjoying it with their family. Like, you know, we, we just had an old strawberry farm that sat vacant for 15 years, and to see, you know, um, all the families there moving into their new homes right now, it's, it's, it's a pretty rewarding process, not just financially, but, you know, I, I get a real kick to, you know, s- work through the process and then see the end product.
It's, um, it's a pretty rewarding job, which is pretty cool, so.
Yeah, right.
Mm.
Now, before we finish the podcast, Carson, I just wanna talk about something that, like, you don't hear ab- on social media, and that is, um, the opportunity that comes up every now and then. It's not very common for a developer to go and buy what I call a, a broken lot, where a developer's gone broke- Mm-hmm
usually for some sort of financing problem or the market's gone down, and they've just, all the subcontractors have just picked up their gear and left. And some time later, maybe six months later, you see a mortgagee in possession sign of this subdivision site that-
Mm ...
hasn't been finished. Or, uh, recently in Lennanburg Street, Southport, there was a high-rise building, building there that was, like, 90 or 80% finished and the developer went broke and same thing, mortgagee in possession.
And I went out and had a chat to a mate of mine, John Facer, and said, "Oh, you know, do you think there's any value in taking over this high-rise building?" And he said, "Oh, yeah, there, there probably is at the right price, but these subcontractors, when they don't get paid, they can get pretty, uh, angry, and they can, they can pour concrete down the pipes," and you just never know what you're inheriting if you wanna take on a project like that.
So have you got any stories in that regard, Carson, that you've heard of?
Yeah. We got the built form version, which we'll get to, but even on a, on a, um, land subdivision we've, uh, haven't actually picked up one, but I've known some developers that did one last year out in Ipswich, and they bought a site. And the developer that was going under said, "Yes, I've done all the bulk earthworks," which is kind of, you know, getting all the grades level and getting all the compaction so then you can go in and build the roads, like it's all done.
They went belly up when the, when the developer come in, they realised there was a lot of uncontrolled fill. So when you, when you bring in fill or you've moved dirt around on site and you haven't compacted it properly under level one, um, certification where you've got the geotech signing off on it, then, uh, sometimes you've got to, uh, you've got to re-compact it and relay it and do all that work.
And if you've, you know, factored your numbers in that that's all done- Mm ... that can be a risk. You hope- you can do a lot of geotech and, um, and work that out. But a lot of times things can still get, get missed. Another one is like a, a asbestos if it gets through the dirt. Like, we had a site, um, that strawberry farm I was just telling you about.
A lot of people just illegally... When you've got land banking sites that we, we bought this off, a lot of people just dump stuff on it because it's been sitting there vacant. So you get, start getting, um, asbestos mixed through it, and especially if it gets into the dirt and you've got to tip the dirt, um, or, or I've had asbestos bonded to concrete before.
It gets really expensive really quick. When you're not just asbest- you know, tipping out a, an, an asbestos, right, you've got dirt mixed into it or concrete mixed into it, like it's, it gets really expensive. So yes, there's always risk buying a site off a, off a developer. Um, I was speaking to someone recently, they had an o- old car body underneath one of the sites and, you know, once again, there's all those issues.
But, uh, because when the geotech's doing their drills, they might do six or seven. Like, if the site's quite big, th- they're not gonna hit every single spot. Mm-hmm. So there's always that risk, which is why you need that contingency. And then in the built form, yeah, like we had a crack at one literally, you know, a, a five-minute walk from here, um, during COVID and, uh, there were some issues with the developers, um, issues with the council sign off.
So it sat there basically, I think it was 100% or 90% built at the time, and then it sat vacant for 15 years and never got the final sign off. So then it had all these waterproofing issues and, uh, when, uh, council finally said, "Okay, yes, it's, uh- It's in a illegal dwelling. Uh, there was still all these issues and it was like, like walls were caving in, there was mold issues through it and it's like, yeah, you, you gotta buy it well, you know?
Yeah. So it's one of those things or, you know, if it's a, a new product where, like what you were talking about, that one in Southport, once again, you've just gotta factor in the margin because you gotta, you gotta really work closely with the old certifier and make sure that you know what's actually been signed off, what's been done.
What if
he doesn't want to take the job?
Well, you, you gotta, you, you better make sure your certifier's all over it- Yeah ... and, and you've got a really clear pathway-
Mm ...
to what can be signed off. 'Cause you're right, you know, contractors can do all sorts of funny things and- Mm ... you know, uh, unfortunately, I, I, I had a friend of mine that literally lost their business 'cause they didn't get paid as a, as a, um, as a brickie and, um- Wow
from a builder going bust. So this understandably ruins a lot of families, the flow on effect of these things happening, so a lot of people get upset and, um, yeah, things happen on site. So yeah, you wanna go in eyes wide open and if you're gonna pick something up that's got, you know, like I said, we preach buy stuff that have got warts on it, but there's still a line where, you know- Mm
you gotta make sure you've got, um, you can- Handle the worst case scenario is kind of how we approach it. Can we handle the worst case scenario? No. We had a site recently, we're like, "Geez, this is such a good site." And we're like, "Well, or, or extending a little bit," or like, "Can we handle the worst case scenario if, like, things get delayed or this issue happens?"
We're like, "Probably not, so let's do it as a joint venture." And then, you know, they, they got the capacity to hold it and- Mm ... w- you know, there's probably a 95% chance that that would've been totally fine, but once again, if you can't handle the worst case scenario, don't do it. You know, just play the long game and you'll be fine, so.
It's real- I just f- uh, it just triggered my, um, subconscious there when you talked about that compacting stuff because I'm looking at an industrial subdivision site at the moment, and one of the reasons I really liked it is there's already a massive road through the middle of this thing and I thought, "Wow, the road's already done."
And I was really... I got educated again when I spoke to the council there on a Zoom call, and he actually said, "Oh, Andrew, you'll probably have to rip that road up." Mm. I thought, "What?" You know, I thought, "That, that's one of the reasons why I thought it was such a great site, the road's already there." He said, "Oh, no, you'd need to have the certifiers in there to make sure that it's been compacted underneath there sufficient for these big road trains to actually- Mm.
Yeah ... go on there." So that again, like, it's just a perfect example of what you mentioned before, where there's so many things you've got to think about with your due diligence.
Yeah. That's why some roads have been built for a small amount of traffic, and if you're change- changing the use, then it's got to be a different thickness, it's got to have, you know, different, you know, uh, uh, gravel and things underneath.
So yeah, y- there's a lot, there's a lot of moving parts, which is... But the best thing about development, there's an expert in every area. And if you don't know, you can employ a, a good engineer or a project manager and r- you know, wrap a team around yourself. If there's enough margin in the deal, uh, you can...
You know, there's a, there's someone that can hold your hand or you can, you know, buy someone's time that's got the experience, and that's what I love about this game. You know, you don't need any qualifications to be a developer, but you better have a really good team that have done what you're trying to do.
And if you can, you know, basically we're just orchestrators of, of the project and just nudging it along and, you know, there's really people a lot smarter than me that are, uh, doing all the other bits, which is good.
It's, it's interesting, Carson. Um, I found out a little while ago that you don't even need qualifications to be a town planner.
Did you know that?
Don't you? No. Oh, I thought you did.
No, you don't need to have qualifications to call yourself a town planner, but- Yeah, right ... you'd wanna make sure that the one you're using does have qualifications, but-
Yeah, right. There you go ... there you go. Well, yeah, you can definitely lodge your own stuff.
I know people that have lodged their own, you know, approvals and bits and pieces, so I think if it ticks the boxes and, yeah.
I think that's why some surveyors actually- Yeah,
they do ...
on their signage in their front door say town planning and surveying. Mm. Because they're qualified surveyors, but you don't actually need town...
My understanding is you don't need town planning qualifications to call yourself a town planner, so there you go.
Yeah. Well, there you go. Learn something every day.
Thanks for listening to part two with Carson Bolt, uh, the masterclass in land subdivision. We're gonna come back for part three shortly, and we're gonna talk about five reasons why you should walk away from a subdivision lot.
Thanks, Carson.
Pleasure, Amos.
Thanks for listening to the Andrew Right Property Podcast. This is all about building a community of like-minded investors who can share real-life stories, experiences, and collaborate with a view to helping each other. Join us. Get in touch through the link in the show notes. I look forward to you joining me on the next episode.
