Hello, and welcome to Inspire and Inform Episode 17. Tonight I’ll be sharing some of my thoughts after being involved in the property space for over 12 years, I’ve worked with hundreds of clients and customers alike. And I want to share with you some of my learnings today in the industry. And having been involved as well as in the as a project sales director in one of Sydney’s top developers. I’m going to be revealing a little bit of the inside story and a few secrets without revealing, you know, the developers I’ve worked with. But tonight I’ll be sharing with you some insights, certainly about some questions that you would be asking property developers or builders before you jump into bed with them or before being involved with them. Or certainly some questions you ask your property professional before making an investment decision about them.
So the questions are a little bit deeper than usual. Hey, my name is Colin Lee, founder of Inspire Realty helping people build better futures together. My vision with this company is to be the most trusted and transparent property investment firms. And my aim tonight is really just to inspire and inform you through the series to educate you and to provide you with the tools necessary to make informed decisions about your property investments.
Just as a quick background, I’ve invested in property for over 10 years. And since then, I’ve made a lot of mistakes, I’ve endured the ups and downs of the property cycles. And I’ve built myself a sizable multimillion dollar property portfolio diversified all across Australia. One of the things I really believe is that I came to Australia as a migrant. And I really had to work hard to make it work and to still, you know, working hard to realize my dreams. But I do fundamentally believe that anyone regardless of their background, their experience, no matter how much you have now what you’re doing for for work, you can change your future, if you have a strong desire if you have a strong dream, and if you have a good reason why. But I am really who I am today, because of the mentors that have helped me that have coached me that I’ve really worked alongside with me, that have also believed in me along the way.
So here are the top questions that you that I encourage you to ask, you may not get through all of them. But I think you can get a bit of a gist of where I’m going with this. Because a lot of property professionals can sell you a lot about the features and the benefits of that particular development. But they don’t really go deep into, you know who the property developer is. So here are just some thoughts about what you can ask. One of them, one of the first questions I like to ask is, what is your founders story? Or what is your team story? What is your CEO story? You know, how did he come about? And why is he you know, why did he start this this organization or this property development company? What is his vision? What is his overall? What does his business stand for? And there’s a saying, you know, the fish stinks from the head down. So it’s important to know who the leader of the business is, and how innovative the business is, as well, are they actually, you know, producing and developing, you know, properties that that is innovative, towards the times. Steve Jobs says, you know, innovation distinguishes between a leader and a follower. So how innovative is your leader? Are they are they up to the times, are they been looking for new ways of bringing in what’s really relevant for purchases these days to the marketplace? Some really cool developers I’ve worked with, and they’ve got some very strong mission statements, things like creating iconic projects that they’re proud of, and their families will be proud to walk, you know, in the near future, or in the distant future. There are some developers that I know that specifically are there to redefine the skyline of Sydney. Some developers are there, you know, they started out with the whole reason of wanting to, you know, build buildings and design buildings with a purpose. There are some organizations out there that are building for a better future, and, and have architecture as art as well, for example. So it’s really important to understand who the developers are, intrinsically, you know. So it’s more than just the surface questions, but you really go deep into the philosophy, the values and the virtues of the founders of the business. You may not always get it right, but at the very least, you ask the question.
The other question I like asking is, what are the key differences that set you apart? I mean, the reality there’s there’s about 3000 plus developments and projects going on at any one time in Australia. There’s probably a lot less now with approval rates not not as fast as it used to be. But the question is, what is their speciality? What really is, you know, what is it that helps them to stand out from the crowd? So is it the innovation that they’re putting in place. So for example, one of the properties that I’ve personally purchased, which is yet to be settling next year, that is a property that has, you know, not that it’s a new concept, but there’s solar panels on the roof top, which is charging Tesla cars at the at the bottom of the building, that is really there to be used by the tenants and the residents of the place. Because they know that car spaces and car parks will be less relevant in the near future, with the advancement of Uber and, and all the ride sharing business. So is it innovation? You know, what sort of innovation are they bringing into the development space, more and more, I’m seeing, a lot of developers are starting to become quite conservative, for lack of a better word, and that’s being polite on the space. And but as you know, now, with COVID happening, a lot of people are starting to work from home. And there’s plenty of studies now done that people don’t just want a small little pokey, you know, two bedroom anymore, they really want a bit of space two bedroom with a study. And a study is not just this little, you know, space on the side of the house that serves no purpose. But it’s really there, you know, it’s purpose built, and it’s actually functional as well. There’s natural lighting in there, it’s a separate space. And it’s not just a little nook in in the in the floorplan or maybe it’s the materiality, maybe it’s, you know, using environmentally friendly materials to build the buildings, what what is it that they’re using, that really helps the environment and our society at large? So maybe there’s it’s the materiality? Could it be the community that they’re part of? are they building a master plan are they do they have resources, and, you know, and, and facilities to encourage community and neighborhood living? There’s one particular developer, I know, he focuses a lot on making sure that there’s multi generations that would be comfortable in living in there. That’s why they build, you know, even though it’s a high rise, they build parks, not parks, but playgrounds on the top of the building, and really encourage, you know, libraries and things like that, that really stimulate community involvement with each other. Could it be convenience, you know, maybe they they have an ability to be able to pick good locations with a foresight of what’s going to happen in the future in terms of infrastructure and investments into that particular area. And that brings me to location, you know, how, how have they picked a location, what are some things that they see that they know, that you may not know, you know, why they picked that particular suburb or that area to develop, and obviously, they’ve, they’re investing millions of dollars into that development, they would have done certain amounts of due diligence, to know that that’s a good site to build on. And that’s, you know, and that’s what they would be looking to highlight in their in their sales process.
The one thing you don’t want your developer or builder to say is that we’re different because we are cheaper than the rest, or our price points are very competitive. I’d be very weary and and certainly be a little bit more careful about those. Not always, I’m being general about it. But you certainly don’t want to pick a developer or buy into a development just because the price point is competitive compared to the other developers, you really want to have that X factor that sets it apart.
Some other questions you can ask, could be why did you pick the location? And how did you put the deal together? So there are a couple of developers that I’m working with, then a lot of them are so willing to tell you a story, you know, because I believe you make, while this is development talk, but the developers make money in the acquisition of the site in putting together the deal in amalgamating the site. And putting forward a good deal in the in the in the purchase of the land. The reality is, there’s only so much you can save on build cost. I mean, these days, build costs is increasing, in fact, so it’s hard to say from that and at the very best, maybe if they’re efficient, they’ve got a good team, they get bulk discounts, maybe you know, they can save on 10% of the build costs. But really, where where the story comes from is really why and how did they put the deal together for the land? And that tells me a lot about the developer in you know, how, what their margins are, like, you know, and how fair are they with the purchases and the people who are buying into that particular property? Um, so, you know, an example of a developer, I’ve asked him, you know, what’s the story of this and, you know, this particular development site, he’s owned it for about 10 years, and he’s just sat on it. So he’s been really cheaply. And now he’s developing the site. And so he’s able to, you know, put the building together and offload and sell the properties within that development at a much more competitive price, still not sacrificing quality in the property. But that’s a good story. So that’s why I mean, price point is not always, you know, something that, that that cuts the deal together. It’s understanding why and how they’re able to create a price point that’s competitive in the marketplace. And you’re smart enough to do your own due diligence and research to figure out if that property is fair in price anyway. So it’s not something you can you can hide away.
Another good question I like to ask is, can you share with us your latest project? And how did you go with that, you know, history tends to repeat itself proceeds itself. So I always like to know, hey, you know, what’s your previous developments? In fact, I’d like to know how many developments they’ve done. So this particular developer, the developers in their 40s, very innovative, very smart guys. You know, they’ve got finance backgrounds, and they’ve put together these sites. And, and for the last was since 2013. So that’s in the last seven years, they’ve done 21 developments. And so there’s a bit of a story, there’s a little bit of precedence, there’s a bit of history with that variable to tell. And I kind of like that, because, you know, it tells me that they’re not first time developers, and you know, they kind of brand new in the game. Not that there’s anything wrong with new developers. It’s just I prefer to work with a little bit more seasoned developers that have some level of track record in the past.
Another good question is, what are your What are your settlement rates in your last project? So I’ve got a particular developer that settled their properties in two July, so that’s about two months ago. And I categorically get them to show me some examples of some of the valuations and they stack up, you know, and so that in compared to the price list, that’s very important, because as a property investor, you want to make sure that the valuations stack up and the value as you do assess the property on many things, I’ve done a number of property evaluations recently. And I can see that the valuers are starting to take notice of quality of build of your aspect of the property of the condition of the property. And so all that really does, you know, affect your valuation. So the developers are out there to, you know, to prove themselves, but at the same time, you’ve got to make sure that the valuations stack up as well. So really important question, can you share your latest project and what were the settlement rates if they settled, you know, majority of them have their products or, you know, a lot of people pulled out because they can’t finance the project. Sometimes they may not tell you that, but surely you can ask around and it’s a small world out there and you probably get some idea. And so that’s, that’s another question.
Another question. I like asking, invariably, this comes out throughout the conversation. That’s why I do quite a lot of due diligence before I take on any projects. Okay, I don’t know what happened there, I actually had a blue screen. So that’s the nature of technology. But I’m back now, hopefully you didn’t miss me too much. Not sure exactly where I’ve left off to be quite open with you. But I’m just going to get started on that last couple of questions that I would recommend that you ask developers or builders prior to signing up or working closely with them. So if you just give me a minute, while I pull up my notes, that’d be wonderful. My apologies about what’s happened. So interesting.
Oh, dear, my bad. The joys of technology, isn’t it? And that’s what happens when you go live. You just never know what could happen. But I literally had a blue screen on my computer. So hopefully this is still broadcasting I’m not sure but Fingers crossed it is anyway, I think I must have stopped, where the latest What is your sediment rate? And what you know, and have your valuation stack up? And the other question is, how are you personally invested in this project? You know, are you holding any of the properties yourself? Are you? Have you bought into any of the units that you’ve built in? Not always a very important question, but that kind of tells me how, personally, you know, invested they are in that in that project that they’re building. Some developers really like to hold on to their project, I know of a number of developers that would, you know, keep the penthouse for example, or keep a floor for example, particularly if it’s a bigger development, because they don’t need to sell it, they’re probably holding and just yield them, you know, the return. So, you know, let’s find out how personally invested they are in the project. That’s always a good question to ask.
And finally, a question I personally like to do my own research, if I’m not able to, to find, I would like to get to know, I guess a bit of the personality but also the the cross section of the different team members that are involved within the company. What are they the credibility? What track record do they have? And what are their backgrounds? Because that really tells you, you know, where the future of the business would be if they have good team members and good people working for them. Ultimately, it’s a people business in any business that you run.
So hey, you know, that’s just a few questions that you could ask your developers and before you take them on board or your professional, or property professional before you engage with any other developers that you work with, hey, if you want to have a discussion with me or have a chat about your personal scenario and brainstorm, you know and have a look at and workshop, your current scenario to see where you’re at and whether you’re in a position to look at building your property portfolio, to live a better life, and a better future, feel free to drop me a line on our website, www.inspirerealty.com Thank you all so much for your time today and tonight. I look forward to chatting with you all next week. So see you later. Bye for now.