Property developer, educator and mentor Rob Flux says property development can accelerate wealth creation, as long as you’re well educated and establish a strategic plan.
The owner and founder of the Property Developer Network told KnowHow founder Bushy Martin on the Get Invested podcast that property development, when coupled with solid investment strategy, is a proven approach to bolster your wealth creation and can help you ‘manufacture profit’.
But property development is no easy feat. It takes the right mindset, skills, and a strategy that’s aligned with your goals and capacity for risk.
Talking about the best ways to approach property development, Rob said no matter what pathway you choose, the biggest thing to remember is that property development in all forms is a marathon, not a sprint.
“The first mistake I would say is to treat it as a get rich quick scheme, because there’s nothing quick about it. You have to treat it with the same respect you would in changing any career. You can’t become CEO on day one. You need to start as the janitor,” Rob explained.
“So you’ve got to put a lot of effort and time into the process to actually learn it. And then even when you know it, you might have the skills, but you won’t necessarily have the confidence. So you’re going to go out and practice it and fail a lot on paper. We want you to fail often, fail safely and fail falling forward so that you actually learn from the process.
“So the first few projects are probably you learning the skills, getting the ammunition in how to actually do the process. But then after a while, you want to start to scale your projects to a point where the size of the projects allows you to keep at least one as profit. And if you keep one as profit, then you will own it outright. It will be positively geared, I guess, for eternity. It’ll be giving you passive income as it goes. It’ll be growing with the market as the market grows. The rent keeps going up with it and it gives you equity that allows you to then scale it into the next project. And so that’s the ultimate goal – to get to a project of that size. And if you collect enough of those, then you’ve got enough passive income that you never need to work again.”
Rob said that sticking to your guns in the long term is just as important as building on your skills and knowledge.
“It’s going to take at least 12 months to actually get you to the point where you have both the competence and the confidence to actually take on a deal. But what tends to happen is people get to about the six month mark and they see somebody else doing a different strategy that suddenly got success. And then while they were learning one skill in doing one kind of thing, they then all of a sudden jump ship and try to do a different kind of strategy and they have to go back to ground zero again. And because they’re not giving enough due process to the path that they were actually on in order to get to the point of success, they have a lot of false starts. And then after two or three attempts at not getting anywhere, they tend to give up. But if they had have stayed on the original path in the first place, they probably would have had success,” he said.
This confidence is needed well beyond the early stages. Rob said there are many hurdles to overcome in property development, and it requires a certain mindset and resilience.
“You will inherently get knocked down many, many times. And so it’s about your tenacity to get back up again, and the mindset that we put in front of us with regards to limiting beliefs and trip hazards that will actually stop us from taking the action. The skill is 50% of it, but the mindset is the other 50%, and we really need someone on our shoulder to actually keep patting us on the back and lifting us up and dusting us off and pushing us back into the arena. Otherwise what happens is we have all the right intentions, we hit the first obstacle, get knocked down and we just don’t get up again,” he said.
However, there are several approaches property developers can use to minimise these hits, including increased education.
“I’ll give you a very famous quote from Warren Buffett – ‘risk comes from not knowing what you’re doing’. And so I think the biggest risk that people create is they don’t spend enough time educating themselves upfront to say what are the challenges in order to get there,” he said.
“The first thing is educate yourself to know what the risks are. The second thing is put a management plan in place. And then the third thing is to not forget that the road is still bloody dangerous. And so you don’t want to ever forget your management plan, because if you manage it right, the risk will never disappears but you minimise it so much.”
It’s also crucial to establish a strategy that considers your motivations, finances and risk profile.
“It’s really important to understand where you want to head to. So that means at least two things – knowing where you’re going and where you are. And I think a lot of people don’t put those two things into their own financial position. So they don’t look at, ‘what’s my budget today? What are my assets and my liabilities? Where am I actually sitting right here right now? And where do I want to be?'” Rob said.
“And then once you know the differences, you can actually navigate a path to say,’ well how do I get from here to there? And how do I keep checking in on myself along the way to actually get there?’ So if you go off course, the ‘GPS’ or plan will redirect you. If you’ve got a road map that’s actually mapped out, you can go, ‘well I’ve deviated from the path, how do I bring myself back on?’ I think most people don’t go to that effort, but we’ve got to design that. And if we do that, well then it’s actually not hard to become financially free. It’s effort, but the mechanism is easy.”
Listen to the full interview here.
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