Making Your First Million.pdf - Association of Net Entrepreneurs and ...

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Making Your First Million envisioning the possible. Raw scrubby land on the outskirts of the city purchased for $50,000 a hectare becomes a rural subdivision selling for $195,000 a hectare. Billy-goat country purchased for $200 a hectare becomes a $200 a night resort with unrestricted views, 2 hours drive from Sydney. A financially strapped company can be acquired outright by relieving the owners of the threat from its creditors and with a small injection of cash, or divestment of its component parts, can be resurrected to earn millions of dollars. These opportunities are everywhere you look. Real money is made in developing an asset rather than speculating. A business associate recently purchased an old house on a large block for $92,000. While living in the house, he subdivided a block, sold it for $40,000 and applied some of the profits to renovating the house which he later sold for $145,000. His net profit was around $50,000, but considering he'd started out with a deposit of only $20,000, his real net profit was 150% and he had the benefit of living 12 months rent free. Just yesterday I was offered a waterfront reserve house on a half acre block for $220,000. The back block was subdividable with a value of $95,000. For an outlay of $40,000 deposit and $8,000 in development costs I could make $80,000 profit in 12 months. Why not? You can make money buying property with lowball offers, rather than developing, but I'm uncomfortable with it. An old school friend has the policy of offering 70% to 80% of market value to people selling property. He goes to the children squabbling over deceased estates, or partners squabbling over divorce settlements and waves a thick bundle of hundred dollar bills under their noses. Here's the money. Here's the contract. Take it or leave it. Like Don Juan's prospective conquests, 99 out of 100 will say no, but if you ask enough people you can make a lot of money. Another friend adopts a less aggressive pose, submitting lowball offers in writing on selected properties and he has picked up some serious bargains in recent years. I'm not overly fussed myself on lowball offers. It has something of the taint of the vulture and in small beer terms reminds me of people who arrive at 6 am at neighborhood garage sales, bullying the owner into submission. More importantly it starts to run contrary to the Principles of Abundance and will inevitably come back and bite you. Steer clear of it. It can be a fine line. There is no black and white when you're trading in the misfortunes of others. Axel, a large property developer, to whom we sold our half of the industrial estate, recently purchased from the receiver, a company which tenanted one of his buildings, for a dollar. He rebuilt the company, re-employing the same staff as well as the previous owner and 18 months later sold it to the US parent company for $2.7 million. It wasn't simple opportunistic exploitation. He saw an opportunity to develop an undervalued asset and took it. SiteSelling.com 130
Making Your First Million The balance point is intent. If your intention is to enrich yourself at the expense of others you're on the wrong side, but if you advantage yourself through the failures of others you skip across to the right side of the fulcrum point. Just. If you're in any doubt I recommend you err on the side of generosity and your generosity will come back to reward you. You won't have any moral dilemmas then. Often, however, we will allow innocent inactivity to mask opportunistic positioning and intent, allowing good fortune to fall in our lap, through the foreseeable and preventable misfortune of others. We often see this, too, in merchant bankers who wait patiently until the very last moment offering a small amount of cash to bring a project to fruition, demanding exorbitant equity share in the new project, knowing the victim by then has no option. This puts me in mind of the shameful opportunism of the civilians who bought the property of the Jews during the holocaust, or the man who dressed in women's clothing to avoid detection on the Titanic's lifeboat. Technically legal but morally indefensible. We get what we give away so we need to be sure our motives as well as our visible actions are above reproach. Just because everyone else is doing it, or we can hide behind 'standard operating procedure', is no reason for us to run contrary to conscience. The terminator has an excellent memory. Buy quality in real estate. Ask yourself: "Would I like to live here?" Is it a good location? Waterfront, views, close to the city, pleasant neighborhood. These are all powerful factors. In the last decade rural hobby farms and houses in the outer suburbs have stagnated while waterfrontages to Lake Macquarie have doubled in price. Inner-city terraces, new and renovated city apartments, ocean views and houses under 5k to the city have increased up to five-fold. Buy quality but use your head. Buy undervalued property or property in an area that is undergoing a renaissance of popularity such as inner-city exslum or ex-industrial property. Many millionaires of the 80's and early 90's are now waiting on tables as a result of buying premium properties at the top of the market. Bet with your head, not your heart. Buy cheaper property with the potential to develop, not fully-developed property with the risk of losing money. Real estate is not as hard as it looks. The seeming complexity of subdivision and development puts many people off, but it's simply a case of getting in and doing it. We recently purchased a 4 Ha block for $205,000 with the intention of subdividing it into four 1 Ha blocks at a development cost of $150,000. One hectare blocks in the area now sell for $195,000 each. By the time the block is developed (we sold it on for a profit as we couldn't afford to hold and develop it) the price per hectare will rise to $225,000. Development has a cost attached to it, but not only does it enjoy huge rises in capital value as you increase the number of titles, but you also enjoy the added advantage of inflation as the property develops over time. SiteSelling.com 131
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