If there’s a name that’s synonymous with Australian property development, it’s Bob Andersen. And for good reason: The co-author of Residential Real Estate Development: A Practical Guide for Beginners to Experts has been involved in over $1B of projects— yes, with a ‘B’— since his burst onto the development scene over 30 years ago. In addition to having personally developed 2822 properties, in the last decade he’s also thrown his hat into the ring to teach over 2,500 budding developers how to do the same.
In this episode Andersen divulges his personal and professional stories, ranging from his athletic childhood in sunny Brisbane to the depths of despair on one tired night. The regular contributor to magazines such as Australian Property Investor and Your Property Investment
describes every step along the way before and after that fateful night, including the chance meeting with a client-turned-mentor that catapulted him to where he is today.
Despite the bumps in the road, Andersen has emerged triumphantly every time to build the empire he thought impossible. He delves into how having passion for what you do really does make all the difference— not just to your happiness but also to the overall trajectory of your life. Even with less than 5 cents to your name, Andersen is proof sometimes all it takes is one person to see that spark within you to get that entrepreneurial fire blazing.Timestamps:
00:24 | Variety is The Spice of Life (and Development)
04:52 | The Chemistry Just Wasn’t There
08:47 | Panel Beating and Public Service
11:41 | Lighting His Entrepreneurial Flame
13:26 | The Night It All Changed
19:49 | The Sentence That Changed His Life
22:43 | Why Me?
25:39 | Hitting the (Metaphorical) Wall
00:50 | You Don’t Have to Spend Money to Make Money
02:44 | Build Your Team First
06:01 | When People Can’t, Books Do
08:56 | Sometimes the Best Advice is the Simplest
15:37 | He Doesn’t Let Himself Get Tied Down
19:23 | Teamwork Makes the Dream Work
22:34 | Stop and Take a Whiff
28:35 | Your Profit Is Your Deposit
33:46 | The Power of Knowledge— And Passing It On
Resources and Links:
[00:21:34] And he came in this Sunday morning. I said, 'G'day, I'm Bob,' and he said, 'Yeah, I've seen you here.' He said, 'Look, have you got any takers for my block of land yet?' And I said, 'Tony, we haven't.' But I made a statement. And this sentence changed my life. I said, 'You know what? I would love to develop that land.’
This is Property Investory where we talk to successful property investors to find out more about their stories, mindset and strategies.
I’m Tyrone Shum and in this episode we’re speaking with Bob Andersen, a typical Aussie battler who saw a golden opportunity and grabbed it, becoming Australia’s property development mastermind. He shares the steps that led him to complete 59 developments in 38 years, how he keeps that passion alive, and how one night was all it took to change his life for the better.
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Variety is The Spice of Life (and Development)
Andersen was born and bred in Brisbane, where he had a typical suburban childhood filled with family, friends, and sport. After a quick stint at university and a couple of stops and starts at various jobs, he realised the entrepreneurial spirit within him that set his soul on fire. It wasn’t always a smooth ride, but once everything clicked into gear it wasn’t long before he was changing his life— and those of others.
[00:00:24] I’m a property developer, and I also teach people how to do successful development. So I've sort of worked two sides of the fence, I guess. I've been a property developer for probably longer than I'd like to admit, a little bit over three decades now. But still going. The passion's still there. So why wouldn't you keep doing it?
[00:00:57] I'll be honest with you. In regards to money, it does produce great returns. And I've never found anything— at least legal, not that I've looked at much illegal— but I never found anything that makes this much money. So that's always a driver. I mean, there's a lot more to life than money, but it is consistently good.
[00:01:25] But also, when you're doing development, you really do one development that's exactly the same as another. So there's always little twists and turns and different types of projects, different types of properties you can do. And they all have their own challenges and different types, different sizes, different localities, all those sorts of things. There's plenty of variety.
[00:01:44] And the other thing is that about nine years ago, I got involved in the education side as well. So I don't just do property developments, I teach it. And that's opened up a whole new world for me as well. I meet a lot of great people doing that, and I get a lot of job satisfaction. And I'm a person that needs to be busy. I'm not a workaholic. But I like to keep busy, I like to have a bit of excitement, bit of variety, bit of adrenaline in my life. And I find that between doing property development and teaching a lot of people about it, that satisfies all of that for me. And as a result, I keep doing it.
Between working on his own property developments and teaching the art of it to others, he loves that no two days are ever the same.
[00:02:43] On any one day I'd be pushing any project forward that I happen to be working on. Because property development, it's really a matter of managing people and managing processes. And because those people— architects, town planners, whatever they happen to be— they're integral within the process. So we're always pushing the process forward, because time is money, as it is in anything. And so every day, we're trying to progress and push things forward, keep on top of situations, keep people accountable for their work, and so there's always pushing forward on that.
[00:03:20] And also, part of my day would be on the education side as well. It could be anything from updating some of the content from our course, it could be even talking to people in my mentoring programme about projects they're working on. So that's the sort of thing I was talking about before about the variety, which I like and need and which keeps me excited and keeps me going. So it's anything from working on projects to working with people. It’s great.
While he’s always lived close to where he grew up in Brisbane, his work has taken him all over the country.
[00:04:17] I'm a Queensland guy, I was born in Brisbane and educated in Brisbane. I've actually only lived in southeast Queensland, I've only actually lived in Brisbane and the Gold Coast. But that said, I've worked in all parts of Australia as well. And I work in different markets in different localities. I do get around a lot, I travel a lot, I’ve done a lot of stuff around Australia but my background is pretty much there. So I was born and bred and educated pretty much in Brisbane.
The Chemistry Just Wasn’t There
[00:04:52] Great. And what did you do for schooling in terms of say, like, did you go to high school then university to study something down this path, or was it something completely different?
[00:05:05] I did the normal school system. I was in the Catholic school system, which is sort of, when you look back at it, quite funny. Like, the first four years of my life I went to the Catholic sort of system, because my mum was a Catholic. I was taught by nuns, and that was interesting. And then later on, I went to an all boys school to finish my education up to year 12, before you went to uni. Which was in a private school.
[00:05:33] And that was great. Although I would have to say, scholastically, I was okay. But I was really at school for the sport, to be honest. We had a very strong sporting school. And I think most of my efforts were put in there. And with the energy I had left over, I put into academic. That's the same as lots of things.
[00:05:57] I did move on after secondary school. I had a crack at university. That's about all I did. I chose a stream or a course that, to this day, I still don't understand why I did it, to be honest. I was reasonably good at physics and chemistry, and somebody got in my ear and sort of pushed me in the direction of either, like, pharmacy or chemistry or something in there.
[00:06:26] And so I took on a degree in Industrial chemistry, would you believe. But there wasn't much career education, really, when I went through school, not like there is now. And I sort of just gravitated there and ended up at university studying organic chemistry, inorganic chemistry, analytical chemistry, maths 3, physics, goodness knows what.
[00:06:49] So the whole point is, I had no passion for it at all. I was just sort of led in that direction. And I didn't know myself all that well. I mean, I was only just coming out of school. Often at that age, particularly guys, we're trying to find our feet and who we are and how we fit into the world. And I didn't realise at the time, but I did later, but if I don't have a real passion for something, I lose interest really fast. And as I did there. So I lost interest in it. I didn't like studying, I didn't study very well. And come August in year one, it was pretty obvious it was going to happen by November that I was going to fail. Not being one to like failing, I did the next best thing, I left. So I can happily say never failed University. I withdrew myself from university with the inevitable and got out.
[00:07:41] I've never been back to tertiary education since. Which is fine. I didn't have to. In fact, ironically, these days, I often make a bit of a joke about it that all the people that were a lot smarter than me, and that went on to university and got degrees in architecture and engineering and town planning and construction management degrees and all sorts of stuff— they all work for me now.
[00:08:14] Robert Kiyosaki or somebody who was talking about why do A grade students end up working for C grade students or something. We need people with degrees.
Panel Beating and Public Service
After he left university, he found he was even more lost than before. As he faced uncertainty with his future career being a blank slate in front of him, he turned to the family business.
[00:08:47] My dad had a spray painting panel beating business at the time. And during high school, I used to work for him. I learnt at an early age, actually, how to panel beat cars and paint cars. My dad was a great worker, he had a very strong work ethic. But like so many people, he just exchanged time for money. And the only way my dad could ever earn more money was to consume more time. And he only ever had the skills of basically a panel beater and spray painter, and actually he was also a mechanic. So he actually had three trades complete.
[00:09:22] But as a result, he worked very hard, he worked long hours to educate his kids, put them through private schools. He had a very strong work ethic, very strong family ethics. And, so, as a result, I used to work with him. And I worked with him on weekends when I was going to uni. Same thing. I would go and work for him when I didn't have lectures.
[00:09:45] But when I left, I thought, 'Well, I've got to get into the workforce now.' And would you believe I went and joined the public service. I just wanted to chill out. I'd had enough. I had so many years of education. I just want to chill out. And I had a few wasted years. Not there's anything wrong with people that work in public service of course, we need them. We need good people there. It's just that I wasn't the right sort of person for those sorts of roles.
[00:10:09] And because I was starting to realise that I had an entrepreneurial spirit. I had a business spirit, I wanted to do things. It took me a little while, admittedly, because of the culture that was there. It took me a little while to actually realise that I needed to be out of there and what I was going to do. I honestly lost a couple years in there. Although I don't know if any years have really lost, I suppose.
Having tried both panel beating and public service, he now knew his true calling was to start a business and work for himself. Although property had crossed his mind, development was still a few steps away at this point.
[00:10:48] Interestingly enough, the public service department I worked for, they were a public service department that actually generated income. Now, a lot of public service departments don't actually generate income, they provide a service, and they do. But this particular— I can tell you, this was SGIO, State Government Insurance Office. They're called Suncorp these days actually, they chopped themselves up.
[00:11:11] But in those days, they had a division, or a whole department in there that used to trade shares. And they also had an area in there that was involved in property. And because of the huge amounts of cash they generated out of the insurance business, they used to reinvest a lot of their funds in big investments, big property investments. City buildings, big hotels, and that. And they also would put money with big developers' developments, that sort of thing. So I had some exposure to that.
Lighting His Entrepreneurial Flame
[00:11:41] And that really got me thinking about business. Not so much the share trading part of it, although that was interesting, but mainly the property. And I thought, 'Yeah, I can see myself going there.' But I didn't quite know how to do it. I knew I had to get out of my job, what I was doing, and I started up a couple of quick cash businesses. Would you believe? I started— this is where the entrepreneurial spirit's really coming out. So I'm still in the public service. And I decided I had to do something on weekends to make more money.
[00:12:08] So I actually took on window cleaning, could you believe that? I'd never cleaned a window in my life. But I went to a cleaning company that sold equipment, and I said, 'I want to buy window cleaning equipment. I'll buy everything you've got here for cleaning windows, but I need you to show me how to do it.'
[00:12:24] And they did. And the guy took me out the front of the shop, he showed me how to clean a window and I bought everything. And I put some flyers, I got some stuff printed off. Because this was before the Internet. And I did letterbox drops around the areas that had high rise buildings. And all of a sudden, I got more work than I could handle. I was on weekends, I'm cleaning windows, and I started to take days off work. I know it's a little bit naughty. But I did. All of a sudden, like, on a weekend I'm making more money than I made a week in my day job.
After creating admittedly more work than he could handle, you may think Andersen had landed the entrepreneurial position of his dreams. However, his engine was only just revving up.
[00:12:49] And so I tossed the day job in. But all of a sudden I hadn't filled the job. And then I was able to start up a lawn mowing business. Can you believe that? I borrowed my dad's mower, my dad's trailer, and I put some ads in the paper. Before I knew it, I was rushed with lawns. And because in Queensland in summer, lawns grow every five minutes. And so I quickly bought a trailer and a mower and I'm mowing lawns during the day. I'm doing windows on weekends. And I thought, 'Wait a minute. What about the night hours? I need to do something there.' And then I went and did a bread run in the early hours of the morning.
[00:13:24] You really had 24 hours to use up!
The Night It All Changed
[00:13:26] I had three cash businesses. I had heaps of cash flowing everywhere but I wasn't getting enough sleep. And it all come unstuck. Because one night after a mate's 21st, very late— I was actually quite sober at the time, strangely— and on my way home at 20 past four it all caught up with me. I went to sleep before I got home. I went to sleep behind the wheel.
[00:13:51] I hit a bridge head on and made quite a mess of myself. The police arrived and thought I was dead. But we fooled them. So what that did, I won't take too long telling you, but it changed my life. It was the best thing that ever happened to me. Because what it did, it put me on my back and it gave me time to slow down and think about my life and where I was going. Those three businesses all came to an end because they totally relied on me exchanging time for money personally. And I couldn't mow any lawns, I couldn't clean windows, and I couldn't deliver bread. So there I was.
[00:14:21] But after feeling sorry for myself for several months, and some operations, I started to think about my life and what I was doing. I suddenly started changing my diet. I was reading a lot of health books. Clean Paul Bragg, I got onto. I didn't turn into a vegetarian. There's no such thing as a part time vegetarian, I realise that, but I cut my meat back and changed my diet. Started to read a few books, some of the old great ones. Think and Grow Rich, Rich Dad, Poor Dad was later on. And decided, 'Well, property's it. What am I gonna do?' And so when I was well enough and I got off crutches— I was on crutches for years— I decided to head to the Gold Coast and make my fortune.
[00:15:46] I thought you go to the Gold Coast to make your fortune. I didn't realise that a lot of people go there to lose it. You know, young guy, full of ambition, full of energy, 10 foot tall and bulletproof. And doesn't even know what he doesn't know. It's a dangerous combination. But anyway, there you go, at least I'm there. And I was out of the public service, and I was down there.
At this point he knew property was where it was at, and he looked at all the different aspects of property he could. It didn’t take him long to pinpoint the developers as the ones who appeared to make the money.
[00:16:40] There was a mate of my dad's who was a builder and a developer, he was both. And he gave me some good basic knowledge and some good advice to kick me off. And that got me going, but I didn't know how to get into property development. There wasn't any direct path, not like there is now. Well, first of all, there was no Internet. If you wanted to find out anything, you went to a library. I had a look around at courses, there was no uni courses, there was no TAFE courses, the closest thing you do is be a property valuer. And I had a look at that and did that for a couple of months. But I could see that wasn't going to get me anywhere and I thought, 'Well, I'm just gonna have to get a foot in the market somehow.'
[00:17:15] So I took on a job at a real estate agency that was selling land, vacant land. They had about four subdivisions they were marketing, just at the back of the Gold Coast. And I got myself a job there. And that at least gave me a foot into the market. So there I was selling land to people who were then building houses. And then I was selling land to builders who would build houses, and then I would sell their houses. And so I was pretty entrenched in that. What I discovered was that I was actually okay at selling. I'd never sold anything before, but I seemed to be okay at it.
He surprised himself with how naturally selling came to him, as it was an ability he never knew he had. After years of schooling in all boys private schools where he saw himself as shy, suddenly he was a new man.
[00:18:10] I feel that being a real estate salesman actually pushed me out there, I realised that the successful ones are fairly bold. They're good communicators, and there's a saying in real estate: sales that follow up gets the sale. So it was always following up on people. People you've seen, people you've shown property to, keep following up on them. And that sort of thing. And that sort of got me out of my comfort zone a bit.
[00:18:35] But it's like anything, you just incrementally get out of your comfort zone. And before, what was uncomfortable becomes mundane, and I did that and found I could sell and started making some good money. But the passion was still in the development side.
[00:18:49] But fortunately in this role, I was meeting property developers because we were selling these subdivisions. And so I got to talk to them. And I got to have a look at subdivisions being built. And I got to talk to people like the planners and civil engineers who do a lot of the design and that sort of thing. And that just sparked my passion even more. And I started to learn some things off these people as well. They were very kind and they were very generous with their time, because they could see the passion in me, I think.
The Sentence That Changed His Life
While many developers start off as investors, Andersen continued to buck trends and approached things from the other way around. His aha moment that started it all has stuck with him every step of the way.
[00:19:49] I became an investor a bit later when I started to keep the properties that I actually developed. Because as a developer, you can get them at raw costs.
[00:19:56] But I had a watershed moment actually and I still talk about it, I talk about it to my students because it was something... sometimes in your life, something happens. It could be a chance meeting with somebody, it could just be a sentence somebody says that just turns your lights on. And this is something. I call it a watershed moment. It's called different things, a lightbulb moment, or aha moment, those sorts of things.
[00:20:22] It happened to me one Sunday morning, when I was in the office. And Sunday mornings were usually a bit quiet.
[00:20:44] But about a month before, a fella had come into the office. Now prior to this, he bought a parcel of land through our office. And he'd gone away and he got a development approval to subdivide it into four lots. And for whatever reason, he decided when he got the development approval, that he was just going to sell it. He wasn't going to go on and develop it.
[00:21:05] And so we came in and he listed it with our office, he listed it with one of the other salespeople in our office. About a month later, this Sunday morning, his name was Tony. I remember him. Not that I'd know, but he seemed to be an attractive looking guy. He sort of had medium length hair, wavy, drove a good car, dressed well, and I thought Tony's a pretty successful guy. I mean, that's just the way I summed him up at the time. Well spoken, well presented, seemed to have a bit of money.
[00:21:34] And he came in this Sunday morning. I said, 'G'day, I'm Bob,' and he said, 'Yeah, I've seen you here.' He said, 'Look, have you got any takers for my block of land yet?' And I said, 'Tony, we haven't.' But I made a statement. And this sentence changed my life. I said, 'You know what? I would love to develop that land. I'd love to buy that block of land off you and develop those four lots. I just don't have enough money.'
[00:22:02] And he said, 'Oh, really?' And he started to ask me like, 'Where did this development thing come from? You're here selling land. Why do you want to be a developer? Where did all this come from?' And I started to tell him, told him about my accident and told him about my passion and so forth. We talked for about 20 minutes. Asked me all sorts of things about myself, even private things.
[00:22:20] At the end of it he said, 'You know, Bob, I'm gonna help you realise your dream.' He said, 'I'm gonna actually make it possible for you to do that development.' And I said, 'Well, that's great, Tony, but as I said, I don't have enough money.' He said, 'Bob, you don't need enough money.' This is where I first learnt it. He said, 'You don't have to have the money. There's ways and means of doing things, and I'm going to show you.' And he did, actually.
Tony then taught him the foundations of what would change his life— a strategy that he is now passing on to his own students.
[00:22:43] And he did what is now commonly called— and in fact I even teach it, it's a strategy of doing property developments without any of your own money— it's called a vendor finance deal. And he actually showed me how to do it.
[00:22:54] Normally, as a developer, we'd be trying to show a landowner how to do it. He showed me. I didn't realise at the time, I got to know him, he was a very sophisticated property person on the Gold Coast. And he used to amalgamate development sites along the beach at Broadbeach, Surfers Paradise and Main Beach. And so he was very au fait with property development using call options, vendor finance, joint ventures, all those sorts of things.
[00:23:15] And he told me later on, I said, 'Why did you do it for me?' And he said, 'You know what? I saw you, once I really got talking to you, I saw you as I was 15 years earlier. Young, full of energy, 10 foot tall, bulletproof sort of guy, dangerous. You remind me just of me. And I actually had somebody those 15 years ago who actually stepped in and helped me. I made a pact with that person that I would do the same sometime when the opportunity arose. And the opportunity arose.'
[00:23:46] When he heard me make that one sentence that changed my life. And he showed me how to do it, true to his word. He took me to his bank manager, he got me organised with finance. I paid him for half the land at the beginning, out of the 80% loan that I got from the bank, and the other 30% I had left over was enough for me to develop the sites with. So I basically had no money in, I just used the land of security. Paid Tony half at the beginning and half when I'd sold the lot. And so I put no money into that deal and did extremely well. And that changed my life.
[00:24:16] First of all, it showed me how you could do property developments, even if you don't have money. If you're smart, and you've got some sort of strategies behind you. But it also instilled something in me, it gave me a seed. Which only came out later on when I also started to do that for other people and showed them how to do things. Sort of like a payback, I suppose you could call it. Pay it forward. It is. Except I didn't just do it with one person, like Tony's mentor did it to him and Tony did it for me. I do it for hundreds of people these days, because that's my life and that's what I do.
Hitting the (Metaphorical) Wall
Andersen’s worst investing moment happened while he was still very young, with no guidance to draw from. In the days of trial and error and no courses teaching property development, there was more than enough room for error.
[00:25:39] What I didn't fully understand was markets and market cycles, property cycles. And I had a good run on the Gold Coast. For a little while there I was doing okay, I didn't realise how cyclical the property markets can be, but also how massively cyclical a market like the Gold Coast can be. I don't think it comes as news to anybody that the Gold Coast can have some very big highs and some big lows. And a lot of that's got to do with the fact that a lot of it's driven by tourism, and the hospitality industry. And when tourism is going well, hospitality industry is going well, there's buildings being built and builders get busy and all those service industries that work off that are doing well.
[00:26:28] But when it doesn't, it just falls into a hole and there's always big oversupplies. And it's always done that. It doesn't have a big industry base behind it other than mostly tourism. It's gotten a bit better over the years, but it still has those highs and lows. Back in those days it was massive highs and massive lows. I didn't realise it. And so I'd done a subdivision, fortunately not too big a one. And all of a sudden, it just hit the wall and I couldn't sell it. So I'm incurring debt. It was very hard, nobody wanted to buy vacant land.
[00:26:57] And what I ended up doing is I realised that there was still some sales if you had completed houses and the prices had come back. But I realised if I just sat there I'd just bleed to death, just go out the back door. And because of a pretty highly competitive sporting background in my earlier days, the thought of giving up... I just couldn't fathom that. I couldn’t do it, couldn't roll over.
[00:27:28] And so I scraped together what I could, I borrowed some money off friends and family. I hooked up with a builder and we started to do some species, little spec houses on the land, one at a time, would you believe. It took me three and a half years to get out of this. But I slowly built houses on the land and I sold them. And because the market was really flat I had to sell them cheaper. At least I was getting rid of the land and I was breaking even on the build and getting out of the land at virtually not much profit.
Although he was able to get out of it eventually, the experience came with its lessons.
[00:28:12] Have a look at property cycles. Get to understand them a bit better. And particularly in places like the Gold Coast. And we've seen some terrible things happen in mining towns and that sort of thing. So what I didn't realise at the time is there's two markets on places like the Gold Coast as well. There's actually a normal market and this is sort of tourism market. But I didn't understand that at the time, I didn't understand property cycles.
[00:28:35] So now that I am a lot more understanding of that sort of thing, and not just property cycles, but markets within markets and micro markets within cities and how different types of product can be in supply or under supply in the same city close by each other. I've learnt a lot since then. And the road became a lot less rocky.
[00:28:56] But that was my first big wake up. I was travelling so well I thought, 'Why isn't everybody doing this? I must just be extra smart.' It was a bit of a pullback for me, but it's good. It was a good lesson. I've made some mistakes I've never made since and my road became a lot easier after that.
Coming up after the break, Andersen shares the importance of taking things slowly...
[00:03:27] I didn't build any buildings, I didn't do townhouses for about four years. And so I got to understand some costing and how to cost subdivisions and how to calculate the yield, which is how many lots of particular size block of land would produce.
The value of knowing all the finer details of a micro-market...
[00:16:37] But what I do is have a look more locally. So we talk about the Sydney property market, well, there's probably 30 different micro markets in Sydney.
He reveals the two components behind property development, and which one is often in short supply.
[00:20:39] The beautiful thing is that if people want to get into property development but they don't have much money, it doesn't matter.
And that’s up next. I’m Tyrone Shum and you’re listening to Property Investory.
You Don’t Have to Spend Money to Make Money
Andersen always knew you could make good money out of a property development, but it wasn’t until Tony came along that he realised he could do it with little to none of his own money. While that was the notion that got the ball rolling, the next deal he did was vastly different.
[00:00:50] I was pretty hot to trot after my first deal. And needless to say, because now I wasn't 10 foot tall and bulletproof as they say, we'll make that three metres tall and bulletproof now. Three metres tall and bulletproof.
[00:01:04] And my sister's boyfriend at the time, my sister Lorraine had a boyfriend called Keith, and Keith was an earthmover. And Keith had a bit of money from his earthmoving. And he said, 'Geez, you did well out of that one, Bob.' And I said, 'Yeah, I did pretty well Keith, hey? I'm pretty smart.' We know the truth now! And he said, 'Bob, I've got some money. How about you go and find a deal and we'll do it together. I'll put the money in.' And I said, 'Yeah, okay, I'll do that.'
[00:01:32] And I did, and I found another deal. And Keith and I did it. Keith put the money in, he put the equity in and borrowed the rest from the bank and did another deal. I call that a joint venture with a money partner these days, or an equity partner. That's a very common, very, very common strategy that I use and my students use. And now I've done two property developments, made some seriously good money. And I haven't put five cents of my own money up yet. And so that gave me the passion.
[00:02:00] But as I said, I sort of pushed on. And then there was a change in the market, which I mentioned just previously. And so that was sort of what I needed to straighten me up a bit and sort me out. Got a little bit too gung ho, a little bit too big. I still didn't have the knowledge base behind me. I had no education. I had no one to hold my hand, I had nobody to ring up and ask questions to and that sort of thing.
Build Your Team First
While today he provides the education, the property development world when Andersen was starting out looked nothing like it is today. However, he still stands by his earlier views that university isn’t the be all and end all when it comes to education.
[00:02:44] I'll be honest, I have mentored some people who've gone through the uni courses, and they're great for getting a job in the big companies, you know, Mirvac and lindleys. But as far as actually being really street smart, and using a lot of creative stuff to make a lot of money, they really don't teach it there. But there's a place for everything, and if people just want to just go and work for a property development company on a reasonably good salary, then go and get a degree in property development. But none of that was around then. So it was a fair bit of trial and error.
[00:03:17] But I met a couple of good professional people. A town planner, and I was doing subdivisions mainly, for about the first four years, that's all I did. I didn't build any buildings, I didn't do townhouses for about four years. And so I got to understand some costing and how to cost subdivisions and how to calculate the yield, which is how many lots a particular size block of land would produce. And I got to understand feasibilities, therefore how to do the numbers, which is critically important, gotta make sure it makes a profit.
[00:03:50] And because of my marketing background, I understood that. So I was building up this skill set, as well. Because the developer wears quite a few hats. As I said before, it's about managing people, managing a process. And so I was building a team of people, and I was learning the process to a point where I was becoming quite proficient in it. And sort of the dangerous part of my career was pretty much over.
[00:04:18] At that point in time, because you were doing subdivisions, and so forth, because property takes time to sell the land and so forth. Where did you have the cash flow to be able to sustain your living?
[00:04:32] I kept the real estate job going for a little while until I finished that second project. The one I did with my sister's boyfriend. So I had quite a bit of cash. I don't know what the present day equivalent would be, but it would be at least the equivalent of a nice new house, probably. Half a mil[lion dollars] maybe? I don't know what the equivalent would be these days. But so that certainly sustained me for a while where I got to a point where I could draw profits out.
[00:05:04] But what I also realised is that on some of the projects that I was doing, I was using [what] we call commercial finance, where I was actually able to pay myself a project management fee on my own projects. So I could draw a basic wage, or reasonable wage actually, on the way through the development, as being the project manager of the development, even though it was me, the developer. So a developer can be a project manager. In fact, most developers project manage their own projects.
[00:05:31] But when using a commercial, for instance, you can pay yourself that. So that gave me a good little earn on the way through. Plus, I had some capital behind me, which I could use as my equity. The bank will give you 75 or 80% of what you need, but you’ve got to put some money in yourself. And that's sort of my profits rolled back into that. It was a little bit to get me through and then I started living off... well, I had more than enough to live off my project management fees. What a quite a good lifestyle living off them.
When People Can’t, Books Do
[00:06:01] That's really interesting. And what about, say, books or stuff that we're talking about now? Have you got any books you could recommend?
[00:06:11] Some of the old favourites, of course, as I said, back in the early days, Think and Grow Rich and Rich Dad, Poor Dad. One that probably gave me a bit of a shift in mindset. I mean, I was entrepreneurial, I was brave. But you've got to remember that I was brought up in a very middle class family. As I said, my dad was a spray painter panel beater. And he spray painted and fixed cars on weekends to earn extra money, to give his kids a good life and holidays, and put them through good schools and all that sort of stuff.
[00:06:43] I didn't get any real investment learning from him. So it was either gonna come from people I knew, or books. But it was half, half, two years book, The Millionaire Mindset. Great book, which actually made me realise a bit more about mindset. I think I was part of the way there. I didn't have a problem with wealth or money. I didn't feel guilty about the sort of money I was making. And I was making pretty reasonable money. But just that whole book really set the tone for me about how wealthy people think differently from average people. In so many ways.
[00:07:31] I can't remember now, there's probably about 20 different extracts that he goes through about analysing a wealthy, successful— we know that success isn't just wealth, of course— but you know, that sort of view, and how they view things. And the unsuccessful person views something this way, it's often with a 'lack' sort of mentality where the other one is an 'abundance' or 'surplus' sort of mentality. And that was quite interesting. That's probably the book that changed my mindset more than any other, in fact.
[00:08:05] I have to say, I love that book as well, too. When I read it, going back at least a couple of years ago, it really changed my mindset as well. And rather than asking— and this is also Robert Kiyosaki that says this as well— rather than asking you or saying that you can't do it, ask yourself how you can do it.
[00:08:22] Exactly right. So are Donald Trump's books. He's a bit of a controversial character. But they've always been interesting. In fact, I got to meet the guy about four years ago, quite an interesting character. Never did our dream in my wildest dreams that I was talking to the future President of the United States. Anyway, you'd have probably done the same thing when you've met him. It's just like, I would have bet anything if someone just said, 'You want to bet your house this guy will or won't become the future president?' I should've watched that episode of The Simpsons. Of course, I would have known but anyway, there you go.
Sometimes the Best Advice is The Simplest
[00:08:56] That's hilarious. What about mentors after Tony, did you seek any further mentors to help you with guiding you through the property development process? Because you've obviously become really, really successful in property development since then.
[00:09:11] I didn't have any one particular mentor. Although I did meet a number of successful people on the way and I took a bit from each of them. It's an old saying, and in fact, the person that told me this I'm sure he's not the first person to say it, but very early in the piece I met an Italian builder developer. And he was a lovely guy, and he used to build apartment blocks. He was like a scaled version of Harry Triguboff, probably. Not in size. I don't think you can scale Harry down in size. Dollars, you know. But he said, 'You know something, Bob? You never go broke making a profit.'
[00:09:51] And at the time I thought, 'Geez, John that's a bit stupid, of course you can't go broke making a profit.' Took me a little while to think about it. I know what he meant now, of course, soon after that I knew what he meant. Sometimes you just try and push too hard for too much. And sometimes you're better off taking a good deal or a good profit. And money has a value in time. And markets can change and all sorts of stuff. If there's a good profit and it's looking at your face, and it's simple, and it's there and you can move on. Sometimes you just take that rather than wait for the little bit extra. You wait for that bit extra and anything could happen.
Property tends to be a numbers game, but it’s important to think about the best logical outcome at the end of the day. While it’s nice to achieve the sale price of your dreams, sometimes that extra one dollar in sale price can cost you much more than a dollar.
[00:10:45] I think it's not being greedy. I think if you had to see its core, I've seen some people that just get fixated with a number. It could be a property they're selling. I mean, I see it with people that are selling development sites, and I might be looking at buying it. I met a guy once, he wanted $1,000,000 for his site.
[00:11:10] It was probably worth close to a million. But I made some offers lower. But I came to realise that he just had this number in his mind was a million. And that was it. It was the number. And I think, honestly, I did talk to him, because I was dealing directly with him. I think he just wanted to be able to tell everybody, his friends and relatives, ‘I sold my block of land for a million bucks.’ I honestly think. I don't think he wanted to say, 'I sold it for $972,000.' He just became fixated on the million.
[00:11:41] And price is only part of it. Because there's other things like terms, conditions, and time. And so I went the other way, and paid the million, but got a long term settlement with a couple of reasonable conditions in there. Which to me was better than paying $950,000, which is what I was looking at doing initially, with a short settlement.
[00:12:07] And that was just an example of somebody, I think he's just fixated on that number. Nothing was going to move him off that number. But then when he got it, he didn't really care if he waited nine months for it, as long as he got the million. He'd rather get a million dollars in nine months than get $950,000 in 30 days.
We all have an aspect of ourselves that doesn’t lend itself well to success. However, as Andersen discovered, recognising that area is the first step to addressing it.
[00:13:02] I think we all have something that maybe we're a little bit weak in, maybe more than others. And with me, it was procrastination. I came to realise it fairly quickly. I would put things off if they were difficult. So what I'd do, I sort of half smart it.
[00:13:17] Each morning I'd do a list of things I wanted to achieve that day. But what I'd do is I'd say, 'Okay, what's the easiest? This is easy, I'll do this.' And I'd do all the easy stuff first. And then invariably what happens at the end of the day, I haven't done everything. And the only thing that's left is the hard stuff, the stuff you didn't want to do.
[00:13:35] And so that'd go on tomorrow's list. And so what I wasn't doing: two things. I wasn't prioritising. I should have worked out every morning what's the most important thing in order of priority and do that. It could be the hardest thing I wanted to do today, but I do it. You know, priority. So if I didn't get everything done, it wasn't so important.
[00:13:53] The other thing is that I learnt not to do that every morning, I learnt to do it the evening before. And I never got to bed, in fact I still do it, I won't go to bed of an evening unless I've planned the next day. And all the little things I want to achieve and want to do. And ideally even try and timeline them.
[00:14:09] That's a great habit.
[00:14:12] It's not a world revelation. It's just one of the little things that I think pays dividends.
He Doesn’t Let Himself Get Tied Down
Properties, or as Andersen calls them, products, come in three types.
[00:15:37] Typically I'd be either developing land— as in lots of blocks of land, vacant land— townhouses, or to some degree, apartments. So typically it'd be that. As I said, in the first four years of my developing life, I just did land subdivision. So I was just doing blocks of land, and selling it to people who want to build and selling it to builders. And then, as I said, I was forced to actually end up putting houses on them to get out of a sticky situation.
[00:15:53] So I tend to work capital cities, I don't do a lot of regional. And I generally don't do mining towns at all. Mining towns, you've got to be the first in and the first out. There's plenty of casualties out there that have got hurt in mining towns. I tend to do the higher growth areas, I tend to do more the larger cities. If not capitals, at least the larger cities and larger regional cities or capital cities.
[00:16:20] At the moment, I'm developing in Brisbane, I'm developing in Melbourne. And I'm also looking at developing a retirement village, which is something of a specialty of mine, in New South Wales. So I'm not tied to locality. And I'm not tied to any three of those products.
[00:16:37] But what I do is have a look more locally. So we talk about the Sydney property market, well, there's probably 30 different micro markets in Sydney. And they're all sort of working different cycles, different price points, and so forth. So if there's one thing you've got to do as a property developer, is get to know your local markets. You're better off choosing a smaller area— could be one or two council areas, two or three suburbs, whatever it is, and become a real expert in that area. Really understand land values. Understand what a townhouse is worth, how big they are, and should I be doing two beds or three beds, that sort of thing. Really get to understand the local market, that's what you need to do. Because property development's pretty local. And you can't just say, 'I'll develop anywhere in Sydney,' because there's so many markets, and you won't understand all of them at the same time. That's where a lot of people go wrong when they start.
[00:17:29] And so I do that. I do develop interstate as well. But I've got good connections interstate as well, that can feed me a lot of that information. And so I'm happy to do any of those three. And as I said, something like a retirement villages is pretty special as well. But it's probably not something someone would start off at.
[00:17:45] With a lot of my students, they start off with just small projects, generally. It could be what we call a splitter, it could be turning one block into two blocks, it could be just a small subdivision, it could be dropping another house, or perhaps a duplex in the backyard of an existing house. It could be demolishing a house and building three. Some often start off with small projects, some start off with slightly bigger ones, depending on a couple of things, how much money they got, but not only that. They could be using one of the strategies I teach where you can do developments with little or no money, in which case the size is not so relevant.
While he teaches a whole range of strategies, he gives a rundown of the most common strategy he uses and teaches that can be developed on no money down.
[00:18:30] The most common one that a lot of my students use is called a joint venture with a money partner. I'll keep it pretty simple. Let's just say that to do a property development, we have to put a certain amount of money down. We call it a deposit, in the development world we call an equity. We've got to put down, let's say, 20 or 25% of our costs. We've got to put that money in first. And the bank will lend us the rest of the money.
[00:18:56] It's not much different from buying a house where we pay a deposit and the bank lends us the rest of the money. On a development, we've got to put some money down and the bank will lend us the rest. So it's really all about where does that initial piece of money come from? That equity, that deposit.
[00:19:10] And the good news is it doesn't have to come from the developer. It could be somebody else who has some money. And so their role is to put in that initial amount of money. And then when that's in there, the bank lends the rest. The developer doesn't have to put the money in, it's somebody else's money.
Teamwork Makes the Dream Work
Like any sort of joint venture or anything where you've got two people, it has to be a good win-win for both parties.
[00:19:23] And there's lots of ways of structuring that, but that becomes basically a type of joint venture. And that money could be simply a loan where they get a high interest rate, or they could in fact become part of the project, where they get a big chunk of the profits as well. So they get their money back at the end, and they get a chunk of the profits. So it's a good deal both ways.
[00:19:49] There's lots of people out there that have money that want more than the few percent the bank will give you. And they can get some very high returns by putting that capital into a property development. They don't have to have the knowledge or anything, they don't have to do any of the work, they just put the money part in.
[00:20:05] My students, I've taught them how to do it. They put in what I call the smart work, and they find the deal and they make it happen. And so, for the developer, they get to make, let's say, 50% of the profits and put no money in at all. For the investor, they might get 50% of the profits, they put the money in, get it out, and they get it. So it's a win win. That's a very common strategy. It's the most popular one, but there's plenty of others. And the vendor finance one I talked about earlier. Another one is a joint venture with the landowner. There's lots of them.
[00:20:39] The beautiful thing is that if people want to get into property development but they don't have much money, it doesn't matter. What you need is knowledge. And there's two components to do a property development. You have to have the knowledge to know what you're doing. But you have to have some money. The bank will give you most of it, but not all of it.
[00:20:56] But getting the money— and I've got a whole range of strategies for how you get the money— is not the bit that's in short supply, it's the knowledge. And when you've got the knowledge, you'll attract money like a magnet. And that's why these strategies are great, because they can get people started straight away. They don't have to save up heaps of money for equity to do a development. In fact, many of my students that are doing multiple projects. I've got students doing six [to] eight projects at a time. $30 [or] $40 [or] $50 million worth of projects at a time. And they don't have even five cents invested in any of those projects. And they're just using different creative strategies.
[00:21:36] And that's where the knowledge comes into play and having that education behind you is so, so important with property development.
[00:21:43] Well, you know better than anybody how valuable knowledge is, and I don't even know how you value it.
[00:21:50] You can't! It's a bit hard, I guess, at the end of the day, if you lost everything and you had that knowledge behind you, most people would say that it wouldn't be a problem to just rebuild everything all up again, because it's that knowledge that you have for life.
[00:22:03] You do it so much faster the second time.
[00:22:05] Yes. That's what I hear.
[00:22:08] They say in the United States that you don't you don't earn any business respect unless you've been bankrupt two or three times.
[00:22:17] Yeah, I've heard about that too.
[00:22:17] So far, so good. Maybe I don't deserve any respect.
[00:22:21] Well, touch wood that doesn't happen to you. Because if you've overcome that, I think you're very, very successful as it is.
[00:22:28] It's a different stigma in Australia, I think. It's almost a badge of honour.
Stop and Take a Whiff
[00:22:34] And what about, say, if you met yourself 10 years ago, what would you say to him in regards to property development?
[00:22:54] Well, nothing's changed with how I think about property development. I think it's still fantastic. But I may have been a bit intense. And probably what I'd say to myself is, 'Listen, just loosen up a bit, Bob. Relax.' As they say, smell the roses a bit more. You can be very successful in property development. I don't know what it was, it was just the energy, the adrenaline and everything. And that was probably because I was 10 years younger. Because you tend to mellow when you get older. You don't know yet, but you do. Oh, it's a joy. It's a joy ahead of you. Don't worry.
[00:23:35] And so probably just relaxing. Do everything right, but just chill a bit more. 10 years ago, I was probably a bit more wound up. But as far as property development goes, I mean, 10 years ago, I hadn't quite started my education side of my business. And so I was 100% property development. Whereas exactly 10 years ago, it was sort of in my mind, and I was starting to organise it, but I suppose what I didn't know 10 years ago is how much I was gonna enjoy it.
[00:24:17] I suppose I would have said to myself, 'This thing you're working on now, It's gonna be your prime reason to keep going in a way. It's gonna give you a lot of fulfillment, a lot of happiness. You're going to meet a lot of great people. So get cracking and get it finished, Bob. The sooner you do that the better.'
Andersen recognises everybody has their own opinion when it comes to the various markets around the country, and shares his own thoughts and predictions.
[00:25:01] When you get in the markets I suppose everybody's got their opinion. Perth, at the moment, as we speak, Perth's not the happiest market in the world. It's very strong on mining as we know, and mining goes a bit soggy. Queensland's strong on mining too, but Queensland falls back a lot on the tourism industry whereas Western Australia doesn't have that big tourism base so they tend to get hurt a bit. But I'll be back into the Perth market. I think it'll probably bounce around a little bit where it is, maybe for another six months. From what I've heard and the people I know over there, it seems to be slowly recovering.
[00:25:40] Adelaide, there's some opportunities still in Adelaide. Adelaide's property development market doesn't have big highs or big lows. It's sort of a steady as she goes sort of a markets, a little bit conservative perhaps. But I don't mind Adelaide. I never have minded it at all. I quite like it. I get there a bit, got some great friends in Adelaide.
[00:25:59] And we usually end up the valley somewhere when I go down. But the market there, a lot of it's smaller developments, splitters, dropping duplexes in backyards, small townhouse developments. But I've got some students doing well down there consistently. So that's okay.
[00:26:17] Melbourne, certainly an oversupply of inner city apartments, and that's been coming for a while, not unexpected. And particularly in the investment type apartments. There's been a move away for a while to do owner occupied apartments. I'm doing a development in Melbourne at the moment, which is an apartment block, a four storey one. But that's particularly aimed at owner occupiers rather than investors. And so we're just about to start building that, now we've already sold half of it.
[00:26:46] I've always loved the Melbourne market, it's a pretty strong, steady market. A lot of old money there. It's hard to talk about a whole market, a whole city like that, because there's suburbs and the market's big. Brighton or Melton, they're still out of Melbourne, you know, top end Melbourne. Not quite top end, but it's suburban as well.
[00:27:10] Is there any sort of specific block sizes or land sizes you look for? Or is it just based on the market that you're building for?
[00:27:20] It depends on the size [of the] project. If you're just looking to do a splitter, which is subdividing one block into two, then really what you need to know is what is the minimum lot size in that particular zoning. So for instance, if the minimum lot size in this particular area in this zoning is 400 square metres, then obviously, you're going to need something that's at least 800 before you can subdivide it. And it might need a few other things going its way as well, then you need to understand that.
[00:27:46] In a different zoning, an 800 metre square lot in a two storey area might mean you could do three townhouses or sometimes four. So it's just a matter of understanding a couple of basic zonings in the area and what you can and can't do. That's the domain of a town planner. And also I do agree with the architect.
Your Profit Is Your Deposit
He used to sell everything undeveloped as it was mostly on vacant land anyway, and then swiftly move onto the next deal. One day, the penny dropped.
[00:28:35] It took me a little while to realise that, as a developer, we've got an enormous advantage over the rest of the market. We've got a huge advantage over all other investors in that we develop property at raw cost. Whereas most investors are buying at retail prices. I mean, certainly there's some distress sales sometimes or mortgagees in possession or whatever it is, and sometimes you can get a great deal. But there's always a million people fighting over those.
[00:29:02] But for instance, if a property was worth $700,000, a townhouse was worth $700,000 when it was finished. As a developer, we're getting it for, what, probably $550,000. We're not paying legals or stamp duty on the acquisition, because we already own it. And we're not paying commission on the sale, because we're not selling it. So it's a huge advantage.
[00:29:24] It's not accidental that property developers have very large property portfolios. And the reason they do is that they're getting property at absolute core costs. And so as a result, they don't have to keep saving up the deposits all the time, like normal people do. Most people that buy investments, they need the market to rise so that they can refinance, and harvest their equity and put it down. And that's not always 100% debt. It's not 105%. Whereas as developers, we just keep using our profit as our deposit. And so we don't have to come up with cash deposits all the time. We just leave our profit in there.
[00:29:56] Yeah, and also on top of that you're creating equity as well, too, automatically.
[00:30:00] Less debt. We've probably got 75 [or] 80% debt, whereas someone else has got 100% debt or 105%. And so they're generally cash flow neutral or cash flow positive in today's interest rates. They're brand new before depreciation, there's minimal to no maintenance. And we could do three townhouses and the brilliant thing is, what could we do? We could keep three, we could sell three, we could keep one sell two, keep two sell one. We've got all this flexibility in terms of how we treat our sales.
[00:30:34] Even something as simple as a duplex. We could sell two, keep two. Sell one, keep one, there's three opportunities. And the ones we sell gives us cash, we need cash, cash is king. You need cash for all our lifestyle, our holidays, our going out, our school fees, whatever. That's the ones we sell, we get cash.
[00:30:54] The ones we keep, we can keep with no pain. And we keep some as any normal investor, we keep it for long term capital growth. But the beauty is we've got it at raw costs. Probably cashflow positive, and we can keep as many as we can finance. Need some good finance broker then, and you can keep as many as you can keep, as I say.
He’s a big fan of keeping his property as it’s a great asset class with a long history, and has the ability to live on forever.
[00:31:38] Sure there's highs and lows in the middle, but it's a long term play, property. So that's okay. The ones we keep, we put aside, and the ones that we sell as our cash.
[00:31:47] The beautiful thing is, some people, because they're in this negative geared world where they're paying full retail price and probably 105% including legals and stamps, often they're negative gearing. And a lot of investors, very sadly, it hurts them. They just get sick of being negative geared, coming up with the money every month. And as a result, all they ever see is that's their life.
[00:32:09] Because as soon as it starts, the rents go up. And things start to improve, they're encouraged to go and refinance, harvest some more equity, go get another one and stay in that pain until somewhere near retirement age. They cash out of some of them, go into positive cash flow.
[00:32:22] The beautiful thing about getting property so cheap as developers, we're in a positive cash flow virtually from day one. And we don't have to sell. And so what invariably happens is all the cash we've ever wanted is the ones that we sell. The ones that we've kept, we don't have to sell them. And we've kept them and paid them down over the years. Because they were never negative geared in the first place. And we got them at raw cost.
[00:32:45] And they pay for themselves, exactly.
[00:32:48] So then what happens, the kids of property developers can't wait for their parents to die so that they can inherit these massive property portfolios that the developers have built up, because they never had to sell a lot of their stock. And they've had a good lifestyle, because that's the ones you sell.
[00:33:09] And what about your kids, by any chance?
[00:33:15] They don't want me to die. I spoil my children by saying, 'I'm going to live forever.' So far, so good. Luke, my son, he's my general manager. So he is in property. He is in other things as well. Yeah, he's got a finance, funds management sort of background himself. He still does lots of things.
[00:33:39] That's good.
[00:33:40] My kids— well, those are old enough— are in property. And they like property.
The Power of Knowledge— And Passing It On
[00:33:46] That's good. It's good to actually have the kids, particularly as your experience of passing them down on to [the] next generation because they value what you've done as well to build that up, they know exactly what you've done. So that's amazing.
[00:33:59] That's one of the beautiful things about knowledge. And we talked about knowledge before. Once you've attained knowledge, you can pass it on. You can pass it on to friends or relatives, you can pass it on down the line to children, including the mindset we talked about. This is the beauty of it. Once you've got this you can pass it on. Intergenerational.
[00:34:19] Absolutely. So what are you most excited about, then, in your property development journey or property education journey, say, over the next five years?
[00:34:27] Keep it going. Keep doing it. I sort of restructured a lot of it as well, as to how I promote my products and that sort of thing, it's loosened up a bit of time for me. But just do more of it. Because I love property so much, because I love property development. I mean, I do my own, obviously, and that's exciting. But I love getting involved in other people's projects. How good a job's this? To actually have something that you love doing and do it. But then also to get the added benefit of getting involved in helping other people do what you do.
[00:35:11] That’s why I'm not lying on a beach. I've tried it twice. I gotta tell you. I've tried lying on a beach twice. Which is another name for pulling the plug and being retired. Doesn't work for me. I think it's all about balance. I mean, you interview a lot of people. And I think it's a lot about life balance, isn't it?
[00:35:49] I know how to work hard and I know how to relax hard. I think I've sort of got it worked out after a few years.
Thank you to Bob Andersen, our guest on this episode of Property Investory.