The Ins and Outs Of Small Development – She Renovates Podcast

“Having a contingency fund or plan is a worthwhile discussion.”

Intro

Well, hello everyone. It’s Bernadette. Back with another episode of She Renovates. And today I have a return guest, Ryan Goodwin. Now Ryan has a construction and development company in Melbourne, and he’s also built a sizeable portfolio himself using small development as a vehicle for that. As I know small development is often the natural progression from renovating in order to seek a higher profit margin. I felt that it was worth spending some time exploring the ins and outs. So let’s get into it.

Bernadette: Hello, everyone. Welcome back, Ryan. I’ve got Ryan Goodwin from Mode Developments. If you’ve heard Ryan on an earlier episode, he’s based in Melbourne, he has a company that pretty much does everything development, renovating, new builds, whatever. I thought that I might interview him on the whole construction and development scenario. The reason being is because I get a lot of questions about whether renovators found a block of land and they think that they might be able to subdivide it and what do they need to consider with costs. That’s a good topic to talk about. The other reason is because Ryan has built a portfolio using the duplex model, is that correct?

Ryan Goodwin: Yes, thanks Bernadette. I have my portfolio or the growth in my portfolio has been off the back of splitters or battle axe blocks, as you might know in Melbourne. One into two, one into three land sales, flipping renovations, building equity a lot, and probably one of my most favourite is to still, maybe turn one into two, maybe for some of your listeners who are looking at their first opportunity. It might be a great idea where it’s lowering some risk and it’s more achievable to many where you would renovate to build equity or manufacture equity in the front home and put that new home on the back to living yourself or having an investment on a sell to cover costs for profit.

Bernadette: Awesome. That’s something that I often say to our community that it is a great way to get more equity into the deal quickly, rather than having to just wait for it  to grow organically.  Let’s talk about the scenario that I spoke to a student this morning. She rang and said, “my son’s found this block of land and it’s in Queensland.  It’s got subdivision potential. I can subdivide and put a single dwelling on it, but it’s only 300 square meters. So what do I need to do about costing?”

You do have the subdivision costing, but in terms of how you would look at that situation, I guess is what I’m going to ask you?

Ryan Goodwin: Yeah, great. Look what we get asked, very similar questions all the time. Whether it be in our business or me personally, like yourself working in this space for many years on the go-to guy, for most friends and family and that sort of thing and savvy investors and renovators.

Firstly, it’s understanding what the property has available to it. Like you said checking with counsel or speaking to someone who can check for you.  The risk code or in Melbourne, it’s a risk code or effectively the bylaws in a local shire that dictate what’s on the title. And then might be something like a landscape overlay, heritage overlay, building envelope, there’s thousands of them and each state is very different.

I’m aware we’ve got a national audience listening. I may not answer every point today, but the principles remain the same. So checking first to see the feasibility of that block of land or the potential for it is of course executed first before making any offers, of course. So it might be speaking to the local town planners in the Shire office, speaking to someone independently, even speaking to the local drafts people or architect offices, perhaps.

If you needed more localized knowledge, if it’s not somewhere at a location you’re familiar with  once you do find out if that there is an opportunity to have a sizable area that you don’t have something like a single dwelling covenant or certain covenants on that property, which in our neck of the woods can take sometimes two, three, four years, and up to 20 or 30 grand to remove .

Potentially still worth it especially if it’s your family home and you’re staying there long-term. You want to build equity in years down the track. But yeah, assuming this is a commercial decision and a wealth creation vehicle for you with this clear timeline, you want to make sure you have all that information in front of you or having the right conversations with the right people.

Probably a  great idea at the time, where you might want to start building a team around you too by way of a great draftsperson or architect or town planner and those advising or advisors who can be your go to people for project one, two, and three. Before getting too carried away with it, my being a bit of a property coach myself I would always discuss the strategy in which you want to enter this.

So what is your strategy? Is your strategy the backyard of your family home? And it’s got great equity and you’re gonna hold onto it forever, or are you going to put mom and dad into it or you want to move into it and then sell the front? Or is there something that will just remain at an investment property? Or is this something you’re looking more to flip? So you’re looking to subdivide build, keep one, sell two, keep both I’ve done all those.

At this point I should advise there’s different tax capital gains, the GST implications to all of these scenarios. It’s also an early stage or a good time to be chatting with your friendly accountant.

While you’re doing that, make sure your accountant is someone who understands property because I’ve had the experience of many, I’m sure Bernadette have great ideas, strategies put all their money and hard earned into it to only find out no one told them they had to GST bill to pay or capital gains or something like that. And we’re talking tens of thousands of dollars.

Bernadette: I know GST is an absolute pain. The other thing, this is the thing I as well as the fact that I don’t like paying GST is that if you sell one, you actually have to pay the GST on settlements. So it’s not once the whole deal is done,  they basically take it out on settlements.

I just want to recap this. Firstly is strategy. You know what? We’re both completely aligned on that because I absolutely, and wholeheartedly agree with that. So you want to be really clear about that.

The next thing is considering a property that you need to become familiar with the local planning laws. So you understand the limitations. I personally think someone that’s new to this probably shouldn’t be doing this work themselves. Like when your first couple of projects, you might want to engage someone to do this for you, so that you can learn from them. I personally think there’s too many risks for new players. Would you agree?

Ryan Goodwin: 100%. If you think on a dollar value risk factor, there’s a lot of skin in the game for these projects.

A lot of money, a lot of cash flow, equity required, a lot of upside and a lot of downside potentially. Whereas I know some of your clients and students might be in there renovating the kitchen or painting the wall. It’s really easy to put a new coat of paint on that wall if it doesn’t look any good. But by the time you purchase the property and only too late to find out you can’t do what you set out to do, it actually can be lost shattering. Again, it’s really great to partner with the right people.

Advisers are really good to have in there. People that should be in your back pocket anyway. Now help with your growth, but partnering with someone on your first project may well be someone like us. This is not why I’m saying it, but a builder who has the appetite for it, a builder that is actually a developer.

Our business for instance, has an in-house draftsperson, an architect, interior designers. So we actually manage all the documentation from the start. We’ll help you do feasibility. We’ll help you do the design and all the way through it. It’s okay if it’s not a company like ours, but there are some others out there.

So if it’s not a builder per say, it might be another kind of consultant or professional. A lot of drafts, people are architects. Also, you can pay fees to get involved with early for the feasibility, some costs association and planning, and then even to help you project manage or supervise whoever you’re ultimately engaged to do the work.

They all come with a different level of involvement from you. A little bit different costs as well. And sometimes they can still be disjoined by having one advisor or consultant upfront saying architect to do all that for you. It’s at  X cost. We had to bring in a builder and then all of a sudden there’s a different operating procedure to work under.

There’s good and bad. I would suggest if you can find a business or company which are builders that can advise in feasibility that have an appetite and experience in the space. They can actually produce the plans that are gonna work, not just look sexy on paper. Some of the icing on the cake here is if you can get some savvy designers and builders on board, we can help you and show you deliberately how to manufacture equity by simplifying the build cost, simplifying the footprint , upgrading cosmetic finishes, really getting that wow factor and bang for buck, which I know you got your PhD in Bernadette. So I’m sure you’d agree, but it’s where you can get more for less effective.

Sometimes when it comes to just designers, they don’t often do that because they’re not building themselves. So we find our combination of experience in our business really works well for our clients. But again, you really need to work out whether you’re working down one path with advisors, one path with engaging designers to take you through that journey.  A journey is feasibility, or maybe just getting in early with good builders that if it all goes well, and they’re a match for you, you can remain with them from step one all the way through to completion, which I suggest is probably worth considering because it minimizes the exposure to too many views, changes of management.  You want people to be responsible, so I know in our experience, we are responsible from day one to the end.

When you end up going through some consultants and then designers and then a builder, if there’s something missed somewhere, guess what? It usually goes back to being blind on the last person or someone missed it in the documentation. It’s not the ethos we operate under all we like, but it’s generally out there sometimes where the poor clients left saying, “hang on. I did know I asked for that thing, but it never got written down.” So no one ever acquired it, which means it never got included, then you know, those sorts of things.

Ultimately though, when it comes back to strategy it’s keeping in mind the end goal. So what is the ending you have in mind? And that’s particularly trying to probably build wealth is the first thing. Now, if that’s by keeping the property building equity or selling it for profit the journey is very similar.

One strong message I’d say to your listeners is just be aware if your project is a commercial one to build wealth or to leave as an investment or to sell. Try and really remove yourself from being emotionally attached. I’m sure again you’ve coached a lot of your students and clients, Bernadette for this, but it’s just about making the smart decisions, not the emotional ones.

So you want to know what the market wants, you want to know how many bedrooms work you want to know the outlook and the finishes and the style and I won’t go on any more. Making sure you make the market, but the important thing would be to try and get as much help through the process as you can, from the start .

For the first time, it would really offer confidence from the start. By doing that once or twice, you might actually fall in love with your builder and do five or six more. Once he got into it, that was really smart. I really learned a lot. And now this time I know I can do it differently or myself or a different way.

Bernadette: I couldn’t agree more. Sometimes the project doesn’t involve builders. Like I did one last year, which was the splitter and we just sold off the block of land. In that instance, I found that the town planner was the key person. Yeah. And there’s things that you can do cause it just always amazes me that you really never get certainty around the project’s viability until after you own it.

That’s the thing that people need to know when they’re looking at subdivision and development. You generally have a pretty good idea that you’re going to be able to do what you want to do, but you don’t know what’s under the ground. And, you can come unstuck pretty quickly if you’re green.

Ryan Goodwin: Yeah, to that point, Bernadette and also if we’re talking about a process, we’re moving through the journey of development. I’ve just written down in front of me. The the building process is some of those that I a point you just raised with contingencies.

Understanding that renovating is one thing, having a contingency fund or plan is a worthwhile discussion. When it comes to new builds, you would like to think that surely it’s, once it’s out of the grant, it’s pretty straightforward entities but some of those are not. It’s not often, but it’s a very common thing to discuss or be aware of. Things like this soil type, what kind of footings or foundations, or if we dig up a space this or contaminated saw, but no one knew about it, you didn’t know it. And so sometimes those, and instead of building contracts usually allow for those costs to be passed back onto the client of course, sometimes with margin .

It’s quite rare in my experience. It’s rare enough that we don’t see that happening much. Maybe once every couple of years where there’s  rock or there’s things hidden under the ground and it’s pretty crazy what we find, but it can happen.

I know, depending on the values or the type of builders, the culture of that builder, that’s sometimes a really easy win for those are the kind of things that I’m still, while your students are doing their due diligence through arrows and recommendations.

Speaking to previous clients are builders. They’re the kind of things that you want to get a real feel for and confirm that you’re going to be comfortable. These are, they’ve got the right values in those businesses, but some of those costs could be contingency that should be considered. They get asked actually things like how much is it per square meter to build? How much contingency there? And there’s lots of different answers for all of those. But a contingency sometimes on a newborn, you should probably always have a say, 10 to 20 grand buffer zone. Assuming you may spend it.

That’s not just to upgrade because you’d like to, I would always say minimum. Now, if we look at an average house build again, we’re a custom home builder, not a volume builder. If we’re looking at the normal pricing, not a cheap price. Now you could be spending anywhere from 350 to $500,000 on a new build. In Victoria that depends if it’s a single story, double story had been and all that sort of stuff. I guess if you would argue that could be 5%, 3%, something like that.

5% would be the maximum I would think. There might be two or 3%. I’ll usually talk around numbers of if you could have 15 to 20 grand, you’re sitting in the account, cash, yours available, or the bank’s money available to you to draw. It would likely get you through any unforeseen. But also any of the gray areas that you’re really not confident on, especially your first time around.

By the time the homes close to being built, the structures out the roost on, you might be choosing your kitchen colours or whatever it may be. And you haven’t spent any of that contingency. If you choose to that’s possibly the time where you might say, “you know what, we’re going to upgrade to the 900 cooktop, or we’re going to do waterfall enters on the island bench,” again, this is only if you believe the return on investments there and it’s meeting the market and you want all that sort of thing.

I’d also like to think that in most cases, that contingency is not touched. And in fact, that’s still there for you at the end of the project.

Bernadette: So here’s a question. What sort of contingency would you include in a development? Let’s say you’re doing one into two.  You’ve got a house on one and you’re just doing the straight subdivision. What sort of contingency would you have on that?

Ryan Goodwin: So if you’re looking to do I guess there’s that you could talk around the development side of it, which would you two separate titles and that point, and then they call the points I raised  just the moment I got probably talk to the house build. If they’d have 20 grand for the house build sorry, I should have clarified.

Bernadette: No, that was clear.

Ryan Goodwin: So if it was for the subdivision, I’m well aware that the question is not everyone would look to build. You may look to subdivide, put a fence up, do your driveway and move on. And again, it depends on the shire and the state, of course. So again, in our area of Victoria in the South Eastern suburbs, and Eastern area, most of our shires expect to see if it’s one into two and the driveways down the side of the house, they expect us to have solid surface driveways installed stormwater or civil. So drainage for the driveway services supplied. Electricity, gas, power, et cetera, water. So what to the real property and all those things are done so that if you are selling that block of land, those services, what they call assets are already on that property and available.

They find you don’t then sell a piece of land and then you’ve got two neighbors now forced to argue either ripping up a driveway or, driving over there the Rose Bush or where the fence is in the wrong place. So if you’re talking to the subdivision only, there’s obviously some costs in the design and consultancy side of things.

Looking at your driveway, fencing, perhaps services, those sorts of things. I’d be encouraging everyone to look at some general figures first for your feasibility. Then before going any further, actually get from fixed quotes from as many people as you need to much like renovating a house. Drainage guys to quote,  the fences to  quote, your concrete as to quote,  your service providers, your retail people out from those service companies can also offer you quotes over the phone.

It is actually a little bit easy to do some of that homework yourself without getting too far down the track by just, it’s going to take a couple of days in the office and emails and phone calls and some pestering, but, we’re all here to hustle, right? So that’s really where it comes through.

So to answer your question, Bernadette, I don’t necessarily see a lot of contingency needed for that part of the process, because typically you’re only doing maybe 5 or 6 stage . might be land surveying, fencing, perhaps drainage or storm water, services underground, perhaps concrete driveway and crossover.

Usually what goes into preparing those blocks for sale. Then obviously your land surveyor comes back to effectively do your plan of subdivision. And that goes back to your shire your council. Your planners, that is to also authorize and that’s another cost. So we’re the only five or six of those types of, or maybe a few more, but those types of people engaged in the process.

It should be an easy enough task to get some price points pretty clear before you really go too far with it. So that gives me confidence personally, knowing that I don’t really need a lot of contingency for that part of it. It’s unlikely that things will fall down and have to be rebuilt.

The drainage guy’s got his machine there, it’s his job to put it in the right spot. It’s very unlikely. I find it that stage that, above and beyond contingency.

Bernadette:  The project that we did last year , we had an interesting time. It all went reasonably well, but the town planner put us in contact with a civil engineer to design the sewer and so on. That engineer was pretty ordinary. Just stuff like he designed the sewer to go diagonally across the block. Okay. And this is the vacant block that we’re going to sell. So I was thinking if you didn’t have a half a clue, you could get into a bit of trouble. That’s what you’re talking about when you’re saying work with a reputable builder. That’s okay for Melbourne cause I’ve got you. We’ve got a look further afield. The other thing that happened, which was really interesting, was there was a TPG pit and a pillar, do they call them a pillar where they’ve got that sort of tower thing, right next to the driveway.

Basically the council that approved where the driveway went. We might’ve rung them and said ” “the actual pit was in the driveway, what do we need to do with that?” And they said, “oh, no, you’ll just have to put a trafficable lead. It’ll be $300. Just ring us when you’re ready to go.” Thankfully, we got that in an email because when we went back and rang them, they said, “you should not have put that driveway there. You did not have approval to do it,” blah, blah, blah. That thing needs to be moved and that’s a very long and expensive process. It’s their words.

So this is all with this wonderful engineer, but thankfully we had it in writing and they couldn’t do a thing about it.

Ryan Goodwin: Wow. At the back of that, and I don’t want to skim over too many scenarios. I’ve been doing this for quite a long time now. That issue may be a rise for other people. It’s important again, you go back to building your team and it’s very much like your students who are renovating homes every day. You found the painter you like, and the cabinet maker you like or the carpet, whatever it might be.

Speak to a handful of plumbers and be aware all plumbers aren’t drainage plumbers. You’ve got internal plumbers, root plumber, sanitary plumber, drainage plumber. Ask around, jump on Facebook, jump on socials, ask your friends, network, ask Bernadette and the team, everyone’s there to champion you.

But they, there really is that due diligence. I’ll put some money in the bank. We own the backyard. We’re going to make a killing view. You’ve got to earn it. I’ll trust your students are all pretty much up for that challenge, Bernadette. It’s about knowing that you do need to be asking the questions. You do have a choice in which contract to use.

You do have a choice in the engineer or the drainage guy or whatever it might be. And so I meet with those people, send them emails, have conversations with them, and if anything smells wrong, a weed, let’s move on to the next one. Ask for referrals, look at their websites and reviews, speak to their clients if you feel you need to, especially on the first one, no, one’s going to worry about it. What I find generally now, if I go back to that, being that guy, being that person, in fact, I’ll just count from a block onto developing myself,  actually putting a new home on for ourselves and I’ve just come back in from that. And we’re doing things at the scale I’ve never done before. We’ve got some acreage and some huge rock walls and pretty cool things happening. And I’m a registered builder. It doesn’t scare me, but it’s not what I do every day.

I’m very much a client or a customer just like we’re talking about. It’s doing that due diligence to make sure I’m getting the right answers, the right budget. To go back to your example, Bernadette, if you had the right to the civil engineer might have made a mess of it, but I would’ve loved to have hoped that maybe your drainage plumber.

Perhaps, or the guy doing the works on site.

Bernadette:  In there was another problem.

Ryan Goodwin: Really?

Bernadette: Yeah. So what I did was engage the town planner and then ask the town planner for recommendations for the engineer. And so the town planner was fantastic. When you go and look at these people’s websites and look at their reviews, they’re all glowing.

I had an inexperienced engineer and what made me cross was I got back to the head guy and  he basically washed his hands of it. We were fine, but he also recommended the earthworks and the drainage plumber. At that stage I thought they’re okay and I discovered that the drainage plumber had left quite a lot out of the poach. Yeah. And so we went with them and then discovered that it ended up being about double, which I’d already budgeted for. So that wasn’t an issue.

You can still do things the right way and end up. So building that team is critical and probably the best way to do that is to find someone else that’s developing and ask them who they use.

Ryan Goodwin: Absolutely. And whether you’re aware that the person’s a builder or a mum and dad, we actually get genuinely calls all the time for people I can’t service from different areas. We’ll give them the time of day and say, “hi, look at for the coldest person, or this is what you’re meant to find in your own area.” There are definitely people that are happy to help, whether it be the advisors OR consultants. We’re not in it to try and chase it down.

We just want to make sure that the industry is not getting a bad rap. So on your journey to finding your right team, I really would be saying, especially on your first project, much like any new project, get your two and three quotes per whatever. Your driveway, your drainage, your fencing, your concrete, and even your builders, you’re going to talk to many.

So yes, do your due diligence and research and I’m hearing what you’re saying. Websites can look sexy and fantastic and be absolutely wrong. Maybe ask to speak to previous clients. If it’s something that you can see, like a driveway, ask, “is there anything in the neighbourhood I can drive past and have a look at?

They seem to be pretty important, especially when it’s your first.  I’ve got a great team of trades and consultants. Fantastic. Except for that one engineer, I won’t use him again. You’re already moving forward to your next project should you choose to with a well-equipped ammunition and an arsenal of people around you, but you just know you need to then ask those friends’ advisors who they would suggest next.

Bernadette: Yeah. I absolutely agree. And we do that but anyhow, I guess the good thing, this was not my first gig. I’d done other development it’s fine but –

Ryan Goodwin: They’re recommended. So you’re from a senior consultant. Like it’s difficult, isn’t it? It’s a hard pill to swallow. I hear you.

Bernadette:  I always think you’re better to go with their team because they’re working with them all the time. They’ve got a rhythm so that was interesting, and I haven’t really made up my mind how I would approach it next time.

There will be a next time so we’ll see. We’re thinking that we might do an next project, something similar in Newcastle.

Ryan Goodwin:  In Victoria, Bernadette, give me a call. I’ll make a copy. We’ll have a look.

Bernadette: We may we’ll do. You never know where I’m going to pop up.

Okay.  The other thing that people need to know, in terms of cost is when you create a new block, yes, it does have GST implications, but it also has contribution costs.

Ryan Goodwin: Yeah. And I can vary depending on share again. So one into two isn’t always in area and my experience doesn’t always bring significant contribution costs. I’m doing one into three at the moment for myself, where I’ve got an original home on a thousand square meter block. We’ve got two are about to kick off on in the area and the council contribution for private open space. I’ll explain this in a moment. Actually, it’s 25 or $30,000 for the development. This is one example, and this will change from state to state in share to share , but that is more commonly seen throughout the country. Now where shires have to bend to the pressure of allowing smaller blocks, more homes, not quite medium density, but they’re allowing more.

In my experience in the area, if I did run into two, it wouldn’t be required wanting three I’ve triggered it and its costs. So that means that the minimum block size is now reduced. And again, in share, or in my example, we need to provide a certain amount of private open space. A certain square metre each is a minimum requirement.

Now, if we’d done that, the cost of that contribution goes up. Their definition is that the cost that they gain from us is to go to creating the private open or public open space. So that money goes towards the council or the shire to contribute to the parklands, reserves and all those sorts of things.

Bernadette: It’s interesting that you don’t cut it for one into two.

Ryan Goodwin: We have, but not in all.  In the past, I haven’t, no I’ve had a couple where I’ve not had any contribution costs.

Bernadette: Wow.

Ryan Goodwin: I’ll be honest, it’s becoming more and more common . It is something you’re right, that should be considered. So not only are your applications for town planning, you’ve got a convenience and costs. You’ve got subdivision costs, you’ve got land surveying costs as well as perhaps your town planners or any other engineer’s consultant that’s even before you do anything on the block.

So yeah, there are some cost implications and as you highlighted to the speaking to a good accountant, really, before you confirm your strategy, because if you’re basing your strategy on your feasibility and your return on investment sounds great, when you think you’ve got to make a 100 grand or 300 grand and we can, and we do  , when the tax man takes half of that, it’s a little bit of a hard pill to swallow.

If you can hold it for a certain amount of time, your inventory anyway, your capital gains tax implications change. And again, I’ll start here, I’m not a financial advisor, not giving anyone personal advice, speak to your accountant about this. However the capital gains tax obligations change, for instance, if you’ve held the property for a one year, you’re going to save 50% of the 50%. Half of gains, so saving 25% tax on it. If you do need to sell it after a year.

Also one example I had Bernadette is the one into three, I was looking to sell one off the plan. Keep too yeah. And the con long-winded conversation. I’ve had my account about how crazy and difficult it is because as myself or my entity will keep one as an investment, I’m claiming the GST and charging GST on that, which means then me personally, now needs to be registered for GST for one property but not as the owner of the property next door. It basically means that not only is the project dealt with as a project they’re dealt with separately. And now me personally, as well as the entity, I hold it in as well as my partner, it’s a real minefield.

I’m not saying this to scare anyone, I’m just suggesting it’s a time you need to speak to a good accountant. One of the best bit of feedback I had many years ago, because I’ve been in property for years was, “why would you go to an accountant who doesn’t already have more property than you?”

Bernadette: Exactly.

Ryan Goodwin: Our wealth creation vehicle and I love property. I love playing the game and  I’m reasonably good at it. It’s helped me get to where I am.

Bernadette: And the other thing is you might be missing out on opportunities like if you hold the property for a certain amount of time you can not have to pay GST. So understanding those nuances in the tax law.

Ryan Goodwin: I’d love to share quickly with Bernadette and the same project on we’re not selling one off the plans , we’re building two to keep two, but I’m actually going to sell once I get to that point. I’ll be selling the front existing house. The benefit of me doing that is that there is no GST component attached to it because it’s existing. Just by getting the advice and changing my theory and mindset, I still get to keep what I was planning to keep. Selling one, but are now no longer going to be paying GST on the sale of one of those things. Now that I’m in, it will be something from 40 to 60. I’ll probably actually 50 to $70,000 worth.

If you can consider that kind of money coming out of your profit at the end of the job, it’s massive and life-changing. The icing on the cake is for anyone looking to hold or keep the property itself, whether it be for the one year, decide on capital gains, or because it’s part of your retirement find a wealth creation vehicle, whatever it may be, any new home, or again, I’m not a financial advisor, but any new home, a new keep you get to look at the seven year, first, seven years of appreciation. And those depreciation costs are absolutely significant.

So again, don’t want to confuse people, but if you can just get a grasp of one or two of these theories by talking to a great accountant, it will probably help you get more confidence and also maybe help you cementing which path you take.

Bernadette: That’s awesome. So basically the moral of the story is to build an expert team that if you’re planning to go down that path, that’s pretty much the long and the short of it. Isn’t it?

Ryan Goodwin: Be clear on your strategy. You build that team who can talk to you about the strategy you’re employing. Maybe even the team who can also consult with you about a different strategy, should you need to bounce ideas off people. That’s really important.

If, for instance, people wanting to go ahead with the build. Just one note I wrote here is worth considering. Obviously you’re going to look and talk to builders about what you get for your home but just in regards to finance, whether it be a bank loan, looking at a construction loan. They like to package everything up with a builder. They don’t want you panning the house because they want to give you money if it’s not going to the builder.

So the extension of that is just being clear with any conversations you had from a package point of view, from a builder. Some will do a turnkey some won’t. What that turnkey can usually mean is a full service, everything. So are they including your letterbox and closed line? Sounds crazy but normally the banks now ask them to do so because it means there’s nothing left undone. Are they doing your boundary fences or side fences? It’s always a question mark.

And there could be three or $4,000 at the end of the job. And you’re saying, “what do you mean I’m building a fence? I thought you were doing it.” Landscaping is a really big one. Just in regards to, is it going to be required? It’s also somewhat sometimes where the banks are happy for them not to be included and you and your partner might be able to do it on settlement. That’s a way you can save three or four or $5,000.

So if you can have a little bit of awareness around those options, and then you can choose the type of lending for the type of project for the type of builder, it means you’re in the driver’s seat.

Bernadette: That is actually an important topic. So with the construction loan, you have to show a builder’s contract to actually get the loan. So you don’t get the money in your bank to pay out. And the bank pays progress payments based on valuation. Basically, what you’re saying is be really aware of the fact that, if you’re planning to take it to lock up or whatever. What’s the non turnkey project called?

Ryan Goodwin:  It would still be a full home. Not a lot of difference, but a turn key,  standard terminology, turn key is everything Yeah. Some banks and maybe a construction loan might allow it to be the structure. They may not demand that the driveway be included, they may not need the fencing or the gardening, the landscaping, the letter box, those sorts of things.

I guess what I’m saying is you, it’s also why you want to know what the bill is doing for you. Is the builder including the driveway or has he just done the slab in the garage? Are they doing the footpath, your front door? Cause that’s what’s on the plan, but it’s not in the contract. So some of those are just really worth, ironing out and understanding, but to go back to your point it’s and I’m just like your listeners, I’m always battling to get financed and talking to lenders and banks and brokers and for the next project and I keep moving the goalposts all the time. But to understand what is available to you in that lending model will also dictate ultimately and what you have to package up with a builder.

And so you need to ensure that you build a, has that information and adequate allowances or adequate fixed prices in there for you.

Bernadette: Yeah. Awesome. And something we didn’t talk about when we were back talking about development is that listeners should be aware that if you are building like more than three, it is anyhow, check with your finance expert that you’re not talking about a normal loan, then you’re talking about something that’s more commercial.

Ryan Goodwin: So when you get to building three items on the block, so I’m facing that at the moment. It goes to commercial lending, which means it changes your LVI,  changes your turns, it changes your interest rate.

If we get back to the cracks of the conversations today Bernadette, for those people looking to dabble in their first projects, I’m strongly suggesting, consider one, consider subdividing and selling the land, you’ll get a buzz, you get some money in your pocket for the next one, build your portfolio that way, build your resources.

So there’s a few things that really will help, your listeners type that first step with a bit more confidence in what I hope for them is, I don’t do it blindly so many do and you hear these stories. And you also then out of other success stories of wow, and I guess my question, Atlanta, anyone out there is, what’s the difference between case one and case two? Do your due diligence, build the right thing and take the time to learn so that you can do it confidently and make sure you’ve got the right people behind you.

Bernadette: Yeah, we can sum it up in one word, it’s preparation.

Ryan Goodwin: Yeah.

Bernadette:  Listen, we’ve done justice to the topic, so I really appreciate you coming on. You’re clearly a wealth of information in that area and. We will include your details  in the notes as anyone in Victoria, although I hear you don’t need any work at the moment?

Ryan Goodwin:  We’re a growing successful small business. We’ve got a great team, but we love it. We don’t really saying out too much. That growth is testament to the greater culture that people and we love to help. So whether we can build for you or, feel free to give us a shout, we’ve got in-house designers, drafts, people. And we don’t have to design it for you. Even if you’ve got something, a border project with plans, or you’ve got something underway and you just need advice. We’d love to chat. We’d love to give you some advice, no strings attached. We’d like to see more successful developers and property owners out there building wealth.

Bernadette: Great. Listen, that’s a wrap.

Ryan Goodwin: Thank you.

Bernadette: Thank you so much.

Well, that’s this week’s episode done and dusted, and next week I’m going to be covering a topic that came from you. So it was a request made in the, She Renovates Facebook page and it’s the whole conversation around whether to renovate or detonate? Is your property worth renovating or should you consider demolishing it and starting again? So some factors that go into making that decision. And before I go, if you’re not a member of our free Facebook group, why don’t you come across and join? Then joining the conversation that helps to inform the topics that I cover in this podcast. So that’s it for me today. Have a great week and I’ll see you next week.