Property development is one of the more advanced property investment strategies any investor can take on and working with the right people is critical to achieving a successful outcome. Jo Chivers has been in the business of property development for over 14 years now and whilst building her own very successful property portfolio, she has also helped many clients source, plan and develop plots of land in the Hunter Region.
Jason Penna recently had the opportunity to ask Jo some questions about how she got started and what’s involved in developing property. If you are interested in property development we highly recommend contacting Jo and discussing with her what opportunities are currently available, being a successful property developer is only a phone call away.
1) Jo you have been involved in property for many years now and currently run a very successful property development company – Property Bloom™, can you tell us a little about how you got started in property and what has propelled you to becoming so successful at it.
“If I’m making this kind of return, what return is the developer making?” – Jo Chivers
I was a marketing manager in a huge corporation, working long hours and making lots of money for others. Whilst I did love my job, I felt time and opportunities were passing me by. I read the book Rich Dad, Poor Dad by Robert Kiyosaki and made a decision to change my life and hence my future. I wanted to set up my family’s future so we could live a great lifestyle into our retirement. Superannuation and a salary job were just not going to do it.
When I was seven months pregnant with my first son, I commenced an intensive property investment course that built the foundations of my property portfolio and business today.
My first investment was really scary. It was a three bedroom apartment bought off-the-plan that cost twice as much as our five bedroom house purchased a few years prior. I couldn’t get my head around the fact that an apartment was so expensive. But after spending six weeks on due diligence, everything stacked up; the apartment was in a flow-on beach suburb that hadn’t yet experienced capital growth that surrounding suburbs had. It was part of a small, boutique water front development. What I didn’t know was that I’d entered the property market at a good time. The market was moving upwards. The research and risk paid off and in twelve months on completion, I sold the apartment and made over $150,000.
My annual salary was about half this amount at the time and I thought, why work ridiculously long hours for two years when I can make the same amount from one property deal?
This result also opened my eyes to the potential in property development. I started thinking, “If I’m making this kind of return, what return is the developer making?”
Acting on a need to also build a business that would be flexible as I started a family and help others plan for their future, Property Bloom™ was born, coincidentally around the same time as my baby boy. I had started looking outside of Sydney to buy after building a portfolio of 4 properties all that were negatively geared at the time. I needed to find properties with stronger cash flow and that’s when I discovered the Hunter Region of NSW. I bought a house on a large block of land, renovated the house and built a duplex behind the house and subdivided. The result was creation of over $100,000 in equity and a cash flow positive yield. I had two friends ask me to find and manage the same type of development for them and that’s when I realised there would be other time poor people needing this type of service. That’s how my business was started 14 years ago now.
2) Being involved in Property Development can be very challenging and rewarding at the same time, can you tell us a little about what your biggest challenges are and how you overcome them.
“take the emotion out of the site selection process and work on numbers only” – Jo Chivers
The biggest challenge when developing property is finding the right development site. There is a long list of features we look for when sourcing land and from experience, I know it is not worth developing a poor site. If the site has too much slope on it, there will be high site costs in retaining walls and spoil management. If the site has rock on it, then there will be high costs in site preparations and if the site does not have drainage access then it may not be able to be developed without negotiating easements with neighbours. All these added costs add nothing to the end value of the properties you are building and therefore, we look for site that need to meet our list of criteria. It can be tempting to want to develop a site that is well located for instance but you have to take the emotion out of the site selection process and work on numbers only.
3) Property Bloom™ is a very successful business where your developments range from Granny Flats to Dual Occupancy to Medium Density living, can you describe which of these you have found the greatest success with.
“Each development strategy has a different outcome” – Jo Chivers
Each development strategy has a different outcome. For instance our granny flat developments which involves Property Bloom locating suitable houses on large blocks, renovating the house and building a two bedroom granny flat on the land is a high yield strategy of 7% plus.
A dual occupancy project where we will build two dwellings on one piece of land and subdivide is an equity creation strategy. Good depreciation benefits are also received.
A medium density project involves building more than three dwellings and is also equity creation and strong depreciation benefits. Both this and a dual occ strategy will also deliver a decent yield of around 6.5%.
The strategy we use for our clients depends on their goals and individual situations and it’s important that they discuss these firstly with their accountant and financial planner.
4) Going into 2015 is there any areas of property development you are focusing on where you feel offers the best opportunities for investors?
“I see 2015 a year of consolidation for the Hunter Region” – Jo Chivers
Property development should be looked upon as a long term investment. We don’t work with clients who want to flip or sell immediately as there are too many exit costs associated and clients really need to be in the business of developing property to be able to manage some of these costs. Property Bloom™ clients are looking to build their portfolio creating more than one property within a year and take advantage of the depreciation benefits, receive some equity gain through the project and decent yields. In my opinion, you can develop property any time as long as the numbers stack up. I see 2015 a year of consolidation for the Hunter Region. We are not working in the coal mining towns but more closer to Newcastle and around Maitland and Cessnock which are all major cities with good population growth, infrastructure spend and diverse local economies. NSW Government and local council strategic plans have identified long term future growth for these cities.
5) Can you tell us a little more about Property Bloom™ and how you work with investors to help them build their dream property portfolio.
“The build time on a dual occupancy project right now is just 12 weeks” – Jo Chivers
After identifying the type of development strategy that is right for our client, we will then begin searching for the right site for them. Property Bloom™ works with local land developers, agents and contacts and we are often offered property/land before it hits the open market. This gives us time to reserve the best lots and conduct our feasibility. We’ll have a concept plan produced and a builder’s estimate completed before our clients exchange on the property. We negotiate the purchase using some key strategies that will minimise holding costs for our clients. The Development Application (DA) is prepared and lodged very quickly and once approved our builder commences construction as soon as clients have their finance in place. The build time on a dual occupancy project right now is just 12 weeks. It still amazes me to see single homes around Sydney taking up to a year to build! Our job is to manage the development process so we save our clients time and money. Our builder and other consultants pass on discounts to our clients based on the volume of work we give them. All savings go towards offsetting the project management fee. At the end of the construction we recommend managing agents and work with them to ensure the properties are leased before Handover occurs. We also arrange depreciation schedules. All our work is reported weekly in a detailed written report that can be used as a handy reference guide if our client want to use them to develop property in the future.
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DISCLAIMER: Information here is for general use only and should not be relied upon. One should see an accountant/financial advisor for their own personal circumstances which will be unique to their circumstances, please refer to our full legal disclaimer for more details.