Mr. Billion Dollar Property Developer Bob Andersen introduces you to the lucrative world of Australian property development.
So what’s property development? Well, I’m a pretty simple person and I find that a great advantage. For me, property development is simply improving the value of land and profiting from it.
So what do I mean by improving the value of land?
THE STAGES OF PROPERTY DEVELOPMENT
This involves three stages.
First, we need to get a development permit to allow us to subdivide the land.
Second, we need to actually subdivide the land into two lots with two separate titles.
Finally, we need to build a house on each lot.
Each time we go through one of the three steps, we’re actually adding value to the land. How?
When we get a development permit to subdivide the land, we increase the value of that property. When we actually subdivide into two lots each with its own individual title we increase the value even further. The value of the two lots will be greater that the value of the one lot plus the costs to subdivide.
AN ANALOGY IN AUSTRALIAN PROPERTY DEVELOPMENT
That’s the basis of Australian property development. In fact, it’s the basis of many other businesses. I call this multiplication-division. Now I know that sounds crazy but look at it this way. When I go to a coffee shop and am feeling like I want a slice of carrot cake, I’ll happily pay five or six dollars for the slice of carrot cake. But there are probably 20 slices that make up a full cake!
That values the finished product at over $100, but they’re probably buying the cake for $20. So they’ve made the profit by subdividing a whole into smaller pieces and then selling each piece at a profit.
OPTIONS TO PROFIT FROM AUSTRALIAN PROPERTY DEVELOPMENT
So let’s say we’ve now completed our two houses. What options are open to us?
Although there’s only two houses, we actually have three options. We can sell both, we can keep both as investments, or we could keep one and sell one.
That’s another great thing about Australian property development – what I call flexibility. The flexibility to keep or to sell.
The results of keeping or selling are quite different. With the ones we sell, we receive a cash profit. It is this cash that we use for our living and lifestyle, food, mortgage, schooling, holidays, toys, or helping others. The ones we keep as investments are the ones we use to build our long-term wealth. So if we need more cash, we simply sell more. If we don’t need more cash, we keep our properties for long-term wealth building and retirement.
So as you can see, this is one of the many ways to improve the value of land and different ways of profiting from it.