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Why oDo full time developers sell everything?

Discussion in 'Development' started by MTR, 9th Aug, 2015.

  1. MTR

    MTR Well-Known Member Premium Member

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    I started a thread on SS on this subject prior to becoming a full time developer.

    My mother's neighbour has been developing for over 25 years and i found out recently that he does not own any properties other than his primary residence. I was gobsmacked as to why he operates like this.

    Now that I am onto my fourth deve I can understand that it is dependent on many factors, one major factor cashflow, increasing volume, market conditions, diversifying into other asset classes etc

    There is no right or wrong as everyone has different end goals, one important factor I have learnt is not to get emotional about property and hopefully make better choices.

    I understand selling means taxman will take a chunk, but I am operating this as a business and am also well aware that when markets decline I may miss other opportunities?
    I buy everything in our Trust and use margin scheme and have also set up another company, ie project management co, as a way to reduce tax. I am not an accountant so you need to do your own homework.

    For me at the moment I plan to sell off my next 2 projects, and diversify into other asset classes. End plan will be to continue with this strategy but perhaps hold 1 unit/villa from each development.

    Be interested in your deve strategy

    MTR
     
    Last edited: 9th Aug, 2015
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  2. XtraFL

    XtraFL Member

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    What size development is he doing? Has he gone from small to big to massive over the 25 years?
     
  3. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    He's clearly not an investor and develops for income.

    Not dissimilar to those who progress in their careers and as the salary increases, so do their expenses and requirement for a better lifestyle.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Developing is very risky as such many developers will become bankrupt at some stage. perhaps ask how many properties his spouse holds or trusts of which he is a beneficiary - or even other family members.

    Also keep in mind the developing is probably a business and profits need to be taken to pay for living expenses.

    Taking profits can also enable them to move onto the next project.
     
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  5. Chomp

    Chomp Well-Known Member

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    I don't think they are aware of the benefits of compounding growth over the long term. And lack of delayed gratification, I guess it is easy to spend the money already as there is plenty of time before a development is finished as well.
     
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  6. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Some developers would form part of the general financially uneducated population.
    Why do 80%, (or whatever the stat), spend every dollar they earn and live week to week?
    As Chomp said above, lack of delayed gratification, no self control.
     
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  7. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    2 Reasons:

    1. More cash in hand for subsequent projects
    2. Serviceability
     
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  8. Perthguy

    Perthguy Well-Known Member

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    You would have to find out if he invests in any other asset classes, super or nothing.

    Years ago, I spoke to a builder (developer) who had been building and selling triplex townhouses for 20 years. He averaged one to two builds a year, so over this time had built and sold probably close to 100 townhouses. He told me his biggest regret was that after all that work, he had nothing to show for it. After running the numbers, he worked out he could have kept one townhouse per year and would have had an amazing portfolio of 20 townhouses. I was talking to him at his latest build and he was planning to keep one of the townhouses for the first time instead of selling all. It is certainly sobering to see someone who has worked very hard for 20 years but with nothing really to show for all that work.
     
  9. Leo2413

    Leo2413 Well-Known Member Premium Member

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    It begs the question, What the h@ll did he do with all the profits...
     
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  10. Azazel

    Azazel Well-Known Member

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    Comes back to the question, are you buying a business or buying a job. If he was treating his income like a job, easy enough to spend it all like anyone else not investing.
     
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  11. Leo2413

    Leo2413 Well-Known Member Premium Member

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    hmm yeah true. It says he averages 2 builds of triplex a year. If each triplex grosses him say 100k then that's 200k gross a year. Its an income...
     
  12. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    I too saw many many builders and developers retire in their 60's with zero property. They just sold everything they built. :(

    On the other hand, Harry Triguboff is a Property Developer and one of only three Australians whose personal wealth tops $10 billion. I watched this 30 min interview that the ABC carried just recently and available to replay here:
    http://iview.abc.net.au/programs/one-plus-one/NU1552H027S00
     
  13. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Thanks. Good watch.
     
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  14. Aaron Sice

    Aaron Sice Well-Known Member

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    He/She probably puts all their spare cash into a Vanguard fund or the like.

    I am constantly amazed and how / why people divest after sales.

    I remember an old saying about developing residential property - something along the lines of "use it to secure capital then take it all elsewhere" - mainly that there are better income producing assets that you shouldn't have to wait a decade to realise.
     
  15. sanj

    sanj Well-Known Member

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    I know someone woeth at least 30m i reckon and he only owns his ppor as he thinks resi properties are a waste of time and capital, hes done a fair few decent developments with partners and sold every one. He owns commercial properties and lots of businesses instead

    Lets not all start thinking our way is the inly way or even the best way.
     
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  16. Perthguy

    Perthguy Well-Known Member

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    I agree. I would certainly not want all of my investments to be in residential property. That said, I think keeping some of what people develop can be part of an overall wealth creation strategy. It depends on how people want to get there I guess.
     
  17. Perthguy

    Perthguy Well-Known Member

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    True, but when a developer tells you he regrets the way he has operated his business for the past 20 years, it's a good idea to listen. Better to learn from someone else's mistakes than make them yourself! :)
     
  18. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I have to agree with @Ace in the Hole and @Propertunity . I think their comments is really reflective of a large segment of people who think along those lines. Its really very few who seek an alternative successful way to create wealth.
     
  19. mrdobalina

    mrdobalina Well-Known Member

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    The key here is that he's reinvested the proceeds into other income generating asset classes.

    I suspect most of full time developers treat it as a job and a source of income. No different to other income earners. I know people on very high salaries, who don't have much assets; whilst others have substantial assets.
     
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  20. Azazel

    Azazel Well-Known Member

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    It's kind've sad. You assume that people who are working that hard must be doing alright.