Finance (how are we going to pay for this??!!)

Adam's approach and my approach to money and property vastly differ. Before I met Adam my view was that you do your best to save enough for a mortgage, then once you have said mortgage, you do your best to try and pay off as much of it as possible - Save save save!  Adam's view is that you work for your money, and then you make your money work for you. In other words, you secure your first property, spend the effort on improving the value of the property and don't working about paying off the mortgage. Then by having the property you use that investment (equity) to borrow more from the bank and so on.

Why am I banging on about our childhood upbringings? Because this is how we are able to afford to build the house right now. Money doesn't fall from the sky and this build is a culmination of the last 15 years of Adam's work. No, not his 9-5 job, that is a completely separate, but all the projects he has been working on outside of his regular job.

Partners in crime.

Adam's Mum and Dad are in real estate and his Dad used to be a builder.  With these kinds of conversations happening around the dinner table, he had a leg up on most people and was encouraged to buy his first house off the plan when he was 19 years old. He kept it for six years and then sold it and used to the profit to invest in the current property we live at together with his Dad (50/50). We weren't together when that happened and the main aim of buying it wasn't to provide a family home but to develop the property. Adam and his Father were able to build three town houses out the back of the existing house (our current house) and then later Adam negotiated to buy part of the neighbour's backyard and used the existing driveway to build another two town houses.  So with the property now having six houses in all, we own and live in the front one, Trevor (Adam's dad) kept one, two were sold and the two new ones we own with Trevor.

Next Adam found and negotiated a detail on the property in Ringwood that we are currently building on and bought that together with his father. The original plan was to build four town houses on that, but long story short, we were only able to subdivide the land into two.  After that, Adam found a 7 bedroom house in Bayswater, which is currently used as a sharehouse, each room being rented out separately.  Along with Ringwood, Adam also found and negotiated another deal on a former nursery in Boronia.  He went into partnership this time with his Dad, a family friend, and two of his brothers and this property is being subdivided into six quarter acre lots.

How did he achieve this? (Please note, these are purely my observations, I'm sure Adam would have much more to add).

1) He had the advantage of being able minimize the financial risk by partnering with other people.  The profit is shared, but the risk is also shared.  It means you can have your eggs in a couple of baskets and if one doesn't work, it doesn't wipe you out. This has it's complications as well, especially when your partners are family members and friends, and yes, there has been tension in the family because of it.

Would you buy this house?... We did!

2) He had self-educated and learnt lots about the property market and developments to get the know-how to find large properties that were advertised poorly and therefore would be able to be bought cheaply. When something is advertised as a "property development" then more buyers will be likely to be bidding. From memory the property in Bayswater had 1 photo and it was so obscured by a massive conifer that you couldn't even see the house!

3) He always does the research. Property layout, zoning, easements, building envelopes, heritage considerations, etc. are all something that play into the success of  a development and much of the work is done prior to any contracts being signed.

4) He does the math. Of course you can never predict what the property market is going to do, and this is definitely a risk since most developments can be quite lengthy and the market within this time can dramatically alter.  Adam puts the work in to get a general idea of what the end result is (how many houses you can build, the cost of the build and potential profit). There have been plenty of properties he has done the math on and it hasn't added up.  For the Boronia property, it was over a year of researching properties and seeing if they are feasible before finding the right one.

5) Patience and persistence. Council is difficult. Neighbours are difficult. Vendors are difficult. Banks are difficult. Your financial partners are difficult. Everything takes a lot of time and work before you are even able to break ground. Honestly, listening to the amount of phone calls he has had to make and take I seriously admire the way he is able to communicate and keep his cool.

Currently, with the property market cooling off, we aren't sure about what to sell in order to be able to finish the house in Ringwood and then be able to afford the ongoing mortgage payments, but I guess the point of this blog post is that owning/building a house is hard work, and it's taken Adam a good 15 years of being in the property market to be in the financial position we are in now to take on building our own house.

Educating the next generation.

** Disclaimer. I take no credit for any of the financial decisions made. In fact I told Adam every new investment was a bad idea, which is probably why I never knew he had ever bought them till after the fact. The only time I was right was with Bitcoin... you should ask him how much it's worth now.