Alice and Justin Hagen Transcript

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Justin Hagen:
We bought and sold and sort of crept through the property market picking up different styles of properties that we thought we could make money on the way through and that led to us actually opening our real estate company.

Tyrone Shum:
This is Property Investory where we talk to successful property investors, find out more about their stories, mindset and strategy.

In this episode, we’re joined with Alice and Justin Hagen, Co-founders of Calibre Real Estate and decade-long experts in property management. The Hagens share how they went from missed opportunities to success in managing others’ property. They also show listeners how opening a business is more often than not, worth the risk.

Also, before we delve into this episode, go over to propertyinvestory.com and subscribe to receive your free property investor case studies where you’ll learn how to generate passive income from your properties. Go there now to sign up for free.

On a day-to-day basis, the Hagens have their hands tied with their business. The couple are focused with providing the best strategies to ensure maximum returns for their clients and expanding the reach of their company.

Justin Hagen:
Well my name is Justin Hagen. Obviously Co-founder of Calibre Real Estate with my wife Alice. On any given day we manage a team of 30 people. We look at strategies for our clients as far as how do we maximize their returns on their properties through our property management division and obviously our sales division.

Alice Hagen:
The focus is growth. We’ve looked at different models to ascertain that growth and we’ve refined it and our property management division has been changed based on different personalities in our property management industry.

Tyrone Shum:
While trying to accommodate for clients’ individual needs, the Hagens have also been changing their company systems. They strive to ensure that their clients are comfortable with the way their property is being managed and that the team culture within the company remains strong.

Alice Hagen:
Team is number one. The culture of our office is so critical but we just looked at over the last, we’ve been in business now for just under nine years and over the past two years we ran with a different model.

What we call like a pod or a squad based property management team whether with three property managers in the one pod and they all work together on the same properties but we just found that some owners and some property managers it just wasn’t the right model for them. So this year we’ve changed our property management division into catering for our individual needs. So we’ve got a senior manager that looks after their portfolio up to around 140 properties and then we have a pod that has just around the 300 mark and has three people in their team. So just depending on what our client needs are and that the individual of our property management skill set we have catered to look after everyone.

Tyrone Shum:
The Hagens are also looking to grow the company by bringing more team members and more management into the business as well.

Alice Hagen:
We got the facilities currently to manage up to 2000 in our current location and the way that we’ve structured our team we can easily add additional team members to the current structure without changing too much.

There will still be a lot less change for our clients. While we have one growing so still remain that high customer service model that we started with.

Tyrone Shum:
Despite completing a degree in forensic science, Alice’s first job was in real estate, inspired by her own grandmother’s passion in property.

Alice Hagen:
I grew up in Sydney in Linfield and went to Clara High School and then met Justin after I was just about to finish my forensic science degree and was just looking at my avenues, you know which direction I was going to go down. I loved studying the criminology side of forensics but I just didn’t see a future in that. So I went to a recruiting agency to get a job in real estate. My grandmother from New Zealand really encouraged me to start to get into property when I was quite young. So I looked into that and I actually got recruited. So I actually started my career in real estate.

Tyrone Shum:
Like Alice, Justin also switched career paths, from working as an aircraft engineer to working in real estate, having discovered an interest in property investment.

Justin Hagen:
I grew up in Brisbane on the northside of Brisbane in Hevron hills went to Hillgrove cooking school and Enoggera and yeah I left Brisbane in 2000 moved to Sydney I got a apprenticeship with quantus as an aircraft engineer and you know I was down there and obviously when I was down there met Alice and yet from there you know I did lots of different things in between but yeah between aircraft engineering and real estate obviously it’s quite a quite a big change but there was plenty of reason behind it.

Tyrone Shum:
Despite their success in the property investment industry, the Hagens claim to have had no support from their families, beginning investing together purely due to their combined interest and passion for the field. In spite of their young age, they knew what they were getting into was long term.

Alice Hagen:
My dad is heavily invested in shares and the only property he owns is his own house. But I’ve been a very visual person and I need to see what I’m investing and be able to make changes and improvements myself and that’s the way I like to invest. So dad was not an influence in getting into property investment. You know, investing, yes. But not particularly with this avenue. Yeah like my grandmother was just very passionate about you know being you know having a portfolio and you know to just keep accumulating that way and that it’s all about long term goals. It’s not about overnight.

Justin Hagen:
I just have a passion for it. My parents now have a few investment properties but when I started, they probably might have had one. But I just had a passion for property. I don’t know really where it came from but I just thought that it was something you could add value and do it well. And obviously reading books and I’m not an massive reader but I do have a really big interest in anything investment or property related so I was always keen to get involved and I just felt that it was a good you know good opportunity and good vehicle you know to put my skill set to work.

Tyrone Shum:
For Justin, his transition into real estate from engineering was a huge jump, especially with having had no prior knowledge to the property investment field.

Justin Hagen:
I was in between engineering and real estate. That was the only transition. But previous to that, obviously like any young person you know lots of lots of different things. I moved to Sydney when I was 18. So you know I worked from when I was 14 I was mowing people’s street lawn and then know washing dishes at the local café all those sort of thing. But yeah just nothing really you know different to anyone else really.

Tyrone Shum:
Despite their ambitions to buy their first property in Sydney, the couple ended up looking to Brisbane to secure an investment. As young property investors, the Hagens were unable to meet the prices of housing in Sydney and moved to Brisbane.

Alice Hagen:
In 2006 we started to look at buying property in Sydney. We were strategically looking around the eastern suburbs areas and just thought you know for what you could get at that time. It just you know you know when you’re young 20s you just want to have everything all at once. I just mean just wanting to be in that location and we weren’t going to compromise. So Justin originally being from Freedy we saw that there was a lot more opportunity to buy closer to the city in Brisbane. So in October 2006 we started to move to Brisbane and we bought our first home as well as an investment property and within two weeks of each other and still under the price tag of the one property that we’re looking at in Sydney. That’s how we started our journey together.

Tyrone Shum:
Luckily enough, the couple were able to get job transfers and since then, started buying and selling subdivided properties in Brisbane.

Alice Hagen:
Both got job transfers. So all of us with the same company moving up to Brisbane and it’s just change of lifestyle change of scenery and then into the property industry.

Justin Hagen:
With the portfolio we’ve had a number of properties that we bought, renovated and sold and also bought subdivided built properties on and then on sold as well. Smaller subdivision things like that were were great I think and achievable back then when you’re first trying to get into it. I think obviously now there is very high demand and it’s hard to get your hands on you know a good subdivision that that works really well. You have to be really on your game and have an opportunity and be ready to act straight away I think when those opportunities come. So I think we were lucky in that sense that we got into the market. We bought and sold and sort of crept through the property market picking up different styles of properties that we thought we could make money on the way through and that led to us actually opening our real estate company. It was purely to sell our own property and look after our portfolio as far as managing it. As we felt we had more knowledge and a lot of the people in the marketplace. It was a sort of a turning point when I had real estate agents ringing me when I wasn’t a real estate agent asking me what I thought a property was worth, what could be done with the property etc.. So I felt that there was an opportunity in the market for a person with that sort of knowledge to come into the market and have a boutique agency.

Tyrone Shum:
Coming up after the break we will delve deeper into their journey on how they diverged into creating their own business within the property industry

Justin Hagen:
I think there was a fork in the road and I think I’ve always wanted to have a business…

Tyrone Shum:
Their biggest lesson learned from missed investment opportunities.

Justin Hagen:
I just think it’s an opportunity missed more than anything which I think will give the listeners an opportunity to maybe learn something about that.

Tyrone Shum:
And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

During the start of their investment journey, the Hagens invested only around the Brisbane area, both buying and renting out properties to accumulate profit.

Justin Hagen:
We’ve mainly been investing around Brisbane we do have one investment on the Sunshine Coast that is in the hinterlands, that we’ve got opportunities for development potential for up to seven dwellings on it, which we will look to develop over probably the next five years. It does have an existing house that gets some income now with obviously the big wedding wedding trade in the sunshine coaching land so it’s quite quite good.

Tyrone Shum:
In starting their own property management business, the couple has foregone private property investment, instead opting to devote their time to clients.

Alice Hagen:
So property in 2010 2011 we did sell. We had nine properties but we did start selling them off to invest more into the real estate agent thing just to keep the momentum with the agency (and the growth). So we’ve held on to the first house we ever purchased. We bought it quite unseen in 2006. We just liked the location, it had city view and it was really close to schools and shops and this was prior to having children. But we just had a goal that we would knock down that house and build our family home. And last year we did that and we’ve just moved into it. So you know it’s like I said it’s all about long term goals and that was an eleven year goal, for us to do that. So we’re all about delayed gratification and you know it’s really been exciting to reach that point.

Tyrone Shum:
While it is often strange for first-time buyers to purchase an unseen property, the Hagens believed in the property’s potential.

Justin Hagen:
I think the thing about the property, that we purchased the first property, yeah to people I think it was a bit strange to buy a property sight unseen but again what we look for is potential. So when our property manager said “hey I found a property, you need to go and have a look at it” and it was tentative at the time and the agent said “look we’ve already got offers on it, so you know if you want to buy it you know that’s it”. So we stood up there on the front lawn on the footpath property and we both looked out and we could see the city and we’re like well you know I don’t think you could go too far wrong in an area like this and we’ve done a lot of research in the specific areas within five k’s of the city with the city view. So it was big risk to take but I think obviously it’s been a good risk and I think if you take a calculated risk based on you know facts and figures and median prices in areas I think that’s the key to our decision.

Tyrone Shum:
Their first property was definitely worth the risk, now doubling in value.

Justin Hagen:
It was worth 435000. Well it’s because it’s got a year out. We just built a brand new house on it. So if you were to buy the same house that we bought you’d probably pay around a million dollars for it.

Justin Hagen:
Yeah it’s sort of hard to calculate what the growth would have been based on a putting a new house on it because you know that’s not give a good idea but you would you be looking around that dollar for a similar problem.

Tyrone Shum:
The Hagens currently own a portfolio of almost $5 million and are expecting it to grow as they look for more properties to purchase.

Justin Hagen:
The portfolio is probably worth around four and a half million dollars to five million that it’s always hard to [calculate]. I try not to sit down and calculate exactly Because I mean, it’s a long term strategy and we’ve got one commercial building in that as well. So you know obviously commercial affected by yields and and so forth. So yeah I think you know based on the current situation around that figure.

Look we’re actually going to get back into the growth stage of our portfolio. We’re looking to purchase. I’ve got a bit of a strategy that we’ve been having a chat about regarding buying properties in specific suburbs that have potential to put new dwellings on down the track. That doesn’t necessarily need to be a subdivision but just areas that we see they’re going to have good growth. And got a house that can be rented out in its current condition and then look at developing that property even if it’s just a single house you know in a five to 10 year period. So that’s the strategy we’re looking at at the moment and this is in the stages of planning for that.

Tyrone Shum:
The couples’ property portfolio did not come easily, as like all property investors, they made mistakes and were forced to pay the price.

Justin Hagen:
I just think it’s an opportunity missed more than anything which I think will give the listeners an opportunity to maybe learn something about that.

So we had a property that we subdivided. It was a great property in the sense that we could subdivide it without having to move the original property so the corner block I think off the top my head was about 920 square metre block, had a brick and tile house on the corner and then we cut off a 405 402 square metal block off the back which was great. Obviously subdivision costs etc. but no relocation of the house so we had an investment there we could rent out whilst we carried out the subdivision.

I think the biggest mistake that we made there and probably left money on the table was that we actually sold the block of land off. And in hindsight yes it was good because obviously you know you could pay back some of the mortgage and then obviously collect the rent but I guess depending on what your strategy is at any given time you know I think the best capital result would have been to hold the block of land, sell the existing dwelling and use the funds there to build a new property on that block of land.

One, obviously if you can hold the property you’re going to have a better rental return. With a new property in that location you get depreciation and obviously a better asset to sell. The house that we ended up keeping was not in great condition and we didn’t really see the need to spend the money on doing a renovation there because someone would probably demolish it down the track anyway. So I think the main lesson is to consider what is the best long term result. I think in short term you think oh well I want to get that money out and you know minimize my risk which is great. But you know obviously there’s an opportunity there where you’re in a position that could hold a better property.

Tyrone Shum:
The couple wanted the quick money and kept the old house rather than its opposing vacant land. Looking back they believed it would have benefited them in the long term.

Justin Hagen:
We sold the vacant land and retained the existing house yeah yeah.

In hindsight I would sold the existing house on the smaller block and built a brand new house on the other block. So then you had a brand new property that would get a better rental return, better rate and better saleable value because it’s you know nice contemporary property in that location and obviously receive depreciation, you know good depreciation whilst you hold that property.

Tyrone Shum:
Unfortunately, during that time the Hagens could not have held both assets.

Justin Hagen:
At that point in time no, it wasn’t a possibility and I think that we just took the easy road to sell the block which is fine but it’s just yeah when you look back you think you know by selling our house we could have you know use those funds to easily build a property.

Tyrone Shum:
They were introduced to this strategy via their office building neighbours, who are still closely working together with.

Alice Hagen:
So I think when we started with subdivision. We’ve done a few and then especially for one of them that we did, there was a house on and as I said to Justin that it was too good just to be demolished. So we went searching for a suitable block that was wide enough to have just a small section of land that was suitable to have a house built. So we found one in the neighbouring suburb and we were able to have then two vacant blocks of land on the subdivisions and then purchase another block to move the house to. So I thought that was a good moment that we decided and then we did that second subdivision that was Justin was just talking about.

Alice and Justin Hagen:
Yes. So when we were setting up the foundations of our real estate agency and we found an office space and the people we were going to share the office space with was a subdivision company.

Justin Hagen:
We actually we got talking with them and and then we actually became one of their first clients back then so yeah we actually have a really good relationship. Now I do a lot of feasibility studies for subdivisions for him because he does them personally and we’re always talking at least on a weekly basis about what’s around and what the opportunities are.

Tyrone Shum:
In 2010, the Hagens were surprised with an opportunity to start their own company after being approached by both professionals and family members.

Alice Hagen:
It’s just a throw in a different direction. We were honestly trying to keep up our development. The next development that we were going to do in 2010 was to go looking at doing townhouses – a small townhouse development – but then we had friends and family approach us and wanting us to manage or sell their property. So our time was shifted towards you know looking after our own development to now having our client’s properties to manage or sell. So that’s where we had a change in direction.

Justin Hagen:
I think there was a fork in the road and I think I’ve always wanted to have a business that I was passionate about so I think that you can use the skill sets and the knowledge that you have to help clients and obviously be paid for that work, you know that was great. I think yeah development is great and I think investing in property is a great vehicle but you still have to have something behind you to be able to keep continuing purchasing property. So I thought that if we built this business up we’d get to a point which is probably the point in time we are now that we can go back into that investment cycle and actually grow to a much bigger portfolio than we could have if we just stuck with you know trying to leverage off each investment.

Tyrone Shum:
As the Hagens give their undivided attention to their clients and their business, they have become less active in property investment.

Justin Hagen:
I think it’s tricky to juggle and I think that once you’ve got clients that rely on you to be providing professional opinions about selling their properties and managing their properties, I think people like to see that you’re focused on them and on the core business that they’re paying you to to do. So I think there has to be a balance and I think definitely when you’re early on in the business, your business takes up 100 percent of your time and you really need to focus on it to make it succeed and then once your business is running well and you have the right systems and the team in place, then you’ve got an opportunity to again look at that investment strategy. Of course you could definitely keep investing in a smaller level, if we didn’t have the business but I think that you know you probably would get side tracked and look for something else anyway.

Alice Hagen:
And also we’ve had three children in that time that’s occupying a little bit of our time too…

Justin Hagen:
So the best advice I ever received in anything “is be interested not interesting”. So be interested in what people have to say, don’t try and be interesting to everybody because at the end of the day people care that you listen

Tyrone Shum:
This is Property Investory where we talk to successful property investors, find out more about their stories, mindset and strategy.

I’m Tyrone Shum and in this episode, we’re back with Alice and Justin Hagen on their property investment journey as a couple and how they’ve found success in both their portfolio and their advisory business at under 40 years of age. The Hagens share with us their subdivision strategies and their experiences with property development.

Also, before we delve into this episode, go over to propertyinvestory.com and subscribe to receive your free property investor case studies where you’ll learn how to generate passive income from your properties. Go there now to sign up for free.

For the Hagens, property investment has always been about taking calculated risks and executing well thought-out strategies.

Alice Hagen:
We thought we were young, we could bounce back, we could you know just we were high risk and high growth at that stage. And as I said I don’t regret anything. I thought that high risk strategy was a good one in that market when we moved up to Brisbane.

Justin Hagen:
When in the early stages when obviously when you’re young – everyone has a different risk profile – but you’ve got an opportunity to make informed decisions and take educated risks about trying to create wealth and things moving forward like everybody is different and you know I love property because you can add value yourself and if you if you want to get in there and get a new roof on or put it in a carpet, you can add value and increase the rent you can make the property more appealing. So I think when I say educated risk it is – everything’s a risk – but you’ve done your research I think you know there’s good opportunity.

Tyrone Shum:
According to the couple, investors should be well informed about an investment’s conditions before taking on any opportunities to leverage for growth and equity.

Justin Hagen:
I just think you’re emulating you know I think obviously lending is a lot different out of what it was then obviously you could leverage a lot more than what you could now and probably for a good reason in a slowing market but I think when those opportunities come at you you take that risk when you have the opportunity to leverage or you get some growth out of the property and potentially equity, then you use that equity to buy a property that you may flip or renovate and sell. So you know it’s not a long term risk in the short term. You know if you do that renovation to get that money back in. So yeah it’s just about using research and what strategies you can use. Because I think obviously people will speak to their finance brokers about you know what strategies they can use to best utilize their funds etc. but you know everyone’s got a different income, everybody’s got a different mindset around that. But I think you just got to see what works best for you and have a chat or question in that area.

Alice Hagen:
Manage cash flow during those times especially during a flip, you’ve got enough contingency, finding things when you’re renovating.

Tyrone Shum:
The couple themselves were independent of any property investment mentors, opting to do the research and creating a team themselves.

Justin Hagen:
We did a lot of research ourselves and I think the main thing is just getting familiar with the current town plan, councils regulations how long things take to get approved, what issues you are going to come up against and just all the extra costs involved…

Alice Hagen:
How much we could do ourselves, who are our contractors, who are we going to have as part of our team. Yeah.

Justin Hagen:
And obviously one thing I think that people will maybe overlook as well is that when you do – just generally – when you do a subdivision the bank doesn’t want to lend you money to do a subdivision. They want to lend you the money to buy the property and then the cost of the subdivision and all the services you’ll have to pay for generally yourself before the bank will come and relook at what you’re doing. So just making sure you have all the contingency. So those different things. I think that’s definitely the key.

Tyrone Shum:
In terms of books, the couple have different favourites, however both quoting them as contributors to their success in property investment.

Justin Hagen:
I love books about specific things I will say, I like books about property and business. I think a business book I would read “Good to Great”. I think that’s that’s a really great book and it breaks down how systems and culture and everything will build a great business and for property, it’s quite clichéd but “Rich Dad Poor Dad” I think one of the first books I ever read, it’s very easy to understand how property works. It’s not confusing and yeah it’s a simple way of understanding how property could work and obviously anyone in their 20s who reads that will probably get an idea about what’s going on and probably get a bit of an idea or view into how that would work.

Alice Hagen:
I’ve recently read Richest Man in Babylon and I found that’s really amazing and a good foundation to your path to investments as well. I’ve actually started reading it to our boys as well. Just so they have it. Cause at school they just don’t teach you about finances and budgeting. And I think that’s a critical step of actually understanding how to create your own wealth as well. About how to manage money.

Tyrone Shum:
As for their best advice ever received, the couple had different yet equally inspiring messages, both relevant to the investment and business side of things yet also life in general.

Justin Hagen:
So the best advice I ever received in anything “is be interested not interesting”. So interested in what people have to say, don’t try and be interesting to everybody because at the end of the day people care that you listen and understand and take note of what they’re saying to you. So for me in business and in my personal life I think that’s one of the key things that I try and stick to.

Alice Hagen:
Mine is “always be a student” so “always be learning”.

Tyrone Shum:
The Hagens had always been big on subdividing, even with their first property back in 2006. However, they made sure they researched the strategy thoroughly before applying it to any property investment.

Justin Hagen:
2007 would have been the first one… October 2006 when we purchased our first property and then an investment unit and then yeah I think during 2007 we purchased the first subdivision and through that strategy obviously and I think the thing about subdivision is there’s a lot of different scenarios. You’ve either got properties that are already on two lots, properties that are on one that need to be two lots and obviously the price difference as far as cost was doing that can differentiate a great deal. So I think that understanding what you need to do and what costs are involved before you dive in because sometimes it doesn’t always work out how you think it will.

Tyrone Shum:
While the Hagens have had success in subdivision, they are wary of the strategy as they know that its results depend on the market and zonage changes.

Justin Hagen:
I look at it because obviously it’s not something you always do straight away. So when we look at a property we look and it go “alright, there’s potential for a subdivision” and depending on what the market would be doing in that area at any given time I think you know you could look at subdividing down the track.

Justin Hagen:
And generally when a property is subdividable there’s potential for that zonage to change again. So if you don’t really need to subdivide it right at that point in time. You know I think there is benefits to waiting. So I think letting a bank know whether you are gonna subdivide or not, it may in some circumstances I guess help getting the finance, knowing that they might a portion of their money back sooner etc. but yeah I think it’s case by case definitely.

Tyrone Shum:
For a particular property the Hagens had bought, the house on the land had to be moved to a separate lot.

Justin Hagen:
So that property was on the northside of Brisbane. It was an 810 square metre block. It was on one lot. So that meant that obviously it required a full subdivision through council before you could sell off any of the property.

Alice Hagen:
So I’ll just say when we purchased that property we put a tenant in it straight away so we were collecting income whilst we were doing this.

Justin Hagen:
And so the main house straddled both properties, obviously both potential lots there. So Alice briefly mentioned about this one before that we have to think about what is the best outcome to this house because it was such a nice house that had been renovated probably within the previous five years. So what we did we actually set out a plan to go and find another property, a block of land and I just wanted to find… well we just wanted to find something as reasonably priced as possible that we could fit this property on because obviously any house existing that you can move has a value already. You’re already adding value to it because the house was about 200 square metres. So we had get it cut in half moved on to trucks. So we found a block land and I believe it was around 235000 and it was only about a kilometre and a half from the location of where the blocks were that were being subdivided. Through that progress you have to get council approval to move the property, the termite inspection etc.. So we got the green light on that. And while all that was happening we were hammering in council with the approval coming through – all the issues we had with that subdivision as far as stormwater. The property did slope towards the back.

Tyrone Shum:
They struggled for approval from the local council for certain development features of the property, in fact claiming that the most forgivable element of the property development were the costs.

Justin Hagen:
So as part of the approval we had to request pits, stormwater pits in the back which not everybody, the council doesn’t really like approving that policy because it can cause extra overland flow when they do overflow. And just things like that so it was actually a really good one to sink our teeth into and to get a real grasp on what things happen. Because it was start to finish dealing with the council. Obviously had the town planners, subdivision company that helped us along the way with that as well.

The cost is forgivable part, the cost. Obviously they’ve changed a bit now. It’s a little bit more expensive at the moment to do it but back then you’re looking at about between 65 and 75000 to do a subdivision which would include if this is from one lot into two lots that’s including sewer connections automated, and obviously that can vary depending on how far you got to bring your sewer and stormwater services. But as a ballpark that was about the round average price of what we were costing us back then. The same thing now you’re probably looking at around 100 to 110 thousand just purely based on high counts of contribution costs. And again depending on what council you’re doing it can vary as well.

Tyrone Shum:
Coming up after the break we will delve further into the Hagen’s property investment strategy and how they’ve built a successful portfolio.

Justin Hagen:
Obviously councils have different zoning so different areas.

Tyrone Shum:
Their profits while applying the subdivision strategy on their properties.

Justin Hagen:
The combined result was a great profit. Individually the subdivision wasn’t a massive profit but there was obviously a joint development is in essence really.

Tyrone Shum:
And that’s next. I’m Tyrone Shum and you’re listening to Property Investory.

The couple believed that the rise in costs for subdivision currently are due to overall pricing differences in all the stages required for subdivision.

Justin Hagen:
Contract costs to allow your services and council contributions have increased. Yeah just the overall cost of anything to do with it. We’ll see you climbing trades all that sort of stuff to get in there and do your pipe work. So it’s just all increased overall. I think you’ve really got to have at least 100000 dollars in the budget if you’re doing a subdivision from one into two.

Tyrone Shum:
While the subdivision strategy is a long and complex one, the Hagens seem to be experts in the process, particularly knowledgeable about zoning and how a potential land lot can be subdivided.

Justin Hagen:
Councils have different zoning so different areas. The view of the council now is very easy to get information. You can go straight on their website interactive mapping for the city and you can actually find out what the zoning is for each area. The zones have changed over the years. So 2014 they all changed, they changed the naming of them in all different areas but yeah, overall you just need to get on there and find out what you can do in your, you know the location that you’re looking.

And the other key thing is one side of the street may be different zoning to the other. So important to get on and actually confirm what the zoning is for that particular property as well.

Tyrone Shum:
Their knowledge on subdivision did not come overnight however. They continuously built on this investment strategy by learning and reviewing their experiences.

Justin Hagen:
I think being you know being in the same office with the subdivision people and just having a general really interest in in the subdivision strategy, I think you just find out different things that can help you along the way. So for a certain corner block, there may be different rulings for land so like there might be an average land size as opposed to you know you definitely have to have 400 square metre blocks. There’s just lots.

The more information that you gather and the more people you speak to, especially town planners or people that have done subdivisions before, they can give you really good insight. And you might think, “oh I couldn’t do that subdivision there because of all this but there’s a lot information that you can “Well alright, well actually you can do x y z that is a possible subdivision and you just then have to weigh up if that extra cost is going to be worthwhile” and I think that’s the real key. Just understanding the cost behind each subdivision. And I always say as well, subdivision will generally cost you the same in a suburb 10 ks to the city as well three ks to the city. So you’ve got to work out “alright, the value of that land once I subdivide it”. “How am I going to consume the 100000 land?” “How’s the reward going to be at the end of it?”

Justin Hagen:
You could turn around and subdivide yards to a $700 000 subdivision and the blocks maybe were 300000 or 325 whereas in a city. You know so that’s where it’s important again to go back and do your sums and look at the end result. Cause, you know, a lot of people think it’s cheap. “It’s a cheap property. I’m going to subdivide and make money” whereas if potentially we look to spend a little bit more to go closer into the city they’ll get a better reward for the rest.

Tyrone Shum:
For their first subdivision project, the Hagens were able to make a large profitable return.

Justin Hagen:
The initial cost for that property was 455000. And then I believe, once a we were done with the survey and the whole subdivision. I believe that came in at about 73-75000.

And because there was, I guess it was a combination of development because there was the opportunity to move that other house. So the other house got moved off the block and we ended up just selling the two blocks off. Because at a point in time we were just looking to turn over, to start moving the investments forward and the blocks sold for just over 325000 each off the top of my head. So it wasn’t a massive capital gain but it was enough for us to spend the money on the house move that we did and we actually made a decent profit on the property that we moved to the other location because the of block land costs 235000. We moved it and with some work we did there I think we spent about 150000 and it sold for 600000.

So that was probably a much better result. The combined result was a great profit. Individually the subdivision wasn’t a massive profit but there was obviously a joint development is in essence really.

Tyrone Shum:
The whole process took around 9 months for the Hagens, although the process had been sped up by the local council.

Justin Hagen:
The whole process from start to finish was about nine months I believe.

Yeah. And the council has improved a lot now. In Brisbane they’ve got a process called risk smart, you can get subdivisions through approvals through in four to six weeks, which you know previously it was three to three to four months. So there has been a lot of streamlining going on and you know that’s great. I’m glad the council has done that because obviously holding costs in any development especially a small development really can show up profits that’s for sure.

Tyrone Shum:
For investors looking to get into the subdivision strategy, the Hagens strongly recommend keeping any existing houses and to hold off on any development for as long as possible

Justin Hagen:
My number one thing as far as subdivision, the best subdivision you can get is one where you can keep the existing house. Because I think just doing a pure subdivision the margins aren’t massive and the risk is higher because if you were demolishing a house and you’ve got two vacant blocks sitting there with no income and you’re trying to sell the blocks off, because the one thing about finalizing a development when it’s a one lot into a two, like you can’t have an existing property sitting over the two properties. Yeah which is a different story if you’re on two lots. If the property is already on two lots you can actually sell it and you could actually secure contracts and then you could demolish the house, you know subject to obviously ticking all the other boxes but you know there’s potential for holding the income for a lot longer. So I think those things to consider as well. So number one if you could find a property on a corner block with subdivision potential that would be… I don’t know. It’s not a unicorn because they’re out there but if you can find them there’s generally… you could make money if you buy well in that circumstance.

Tyrone Shum:
They strongly push for the buy-and-hold strategy, choosing it as the first thing they’d advise themselves on if given the opportunity to go back 10 years ago.

Justin Hagen:
If I met myself 10 years ago I would probably say when you’re investing hold the potential investment for as long as you can before you develop it. I think that’s my key takeaway and that’s one thing I think I mentioned that’s the strategy that we’re looking to get involved in our next journey. So I think you know for me I’m probably looking back at that now and looking back at that 10 years now and going alright, what would’ve done differently. I think that’s the key.

Alice Hagen:
And then I would actually say if you don’t need to sell it hold onto it. So only only sell if you’ve got a purpose – a reason to.

Justin Hagen:
Something not to do with money. You know I’ll see another opportunity… yeah that’s key. It’s very tempting to always take the profit then but if you don’t need to. Absolutely yeah.

Tyrone Shum:
For their future plans, the couple aim to buy more properties to hold and develop in the long term, while also building custom homes for their clients.

Justin Hagen:
Like I was mentioning, for me it’s about buying property that are just in reasonable condition property that has the potential to be demolished and hold those properties for a period of on average seven years and then look at developing them. That’s definitely the strategy that I’m looking to put in place. And the reason being is that there’s a lot of grey areas within 10 Ks at the Brisbane CBD that have a lot of old houses. And I think if you can get you know buy properties in the areas then that’s obviously you know generic there’s obviously some suburbs always performed better than others but you know for me that’s what we’re looking for and then build a brand new property on that. And if we’re in a position to hold that property rent it out get the depreciation and all those things or if the market’s in an opportune time we’ll maybe sell a couple down.

So the strategy will be to buy properties over the next five years and then property that was bought in the first you then start developing that in the 6th year or so, so it’ll be finished in the seventh year.

Alice Hagen:
And then I’m really excited about we’ve just completed that family home build and we project managed that with our builder and we had such a great time being able to specify every single fixture and sitting in the property and you know choosing everything. And just being in real estate now for the last nine years we know what our clients want, like what our buyers are looking for so to be able to build a boutique townhouse development and start to finish project management, like that excites me and also doing custom build homes as well and then selling them. So different strategies but like we can merge both of our dreams together into a property strategy.

Tyrone Shum:
The Hagens are willing to hold off on their portfolio for their certain long term benefits.

Justin Hagen:
Yeah it’ll be a buy and hold for as many as we can. You know if we buy say 8 properties over the next five years and then we’ve got to develop and sell four of them, that’s great still building our portfolio to support that cash flow as well.

Tyrone Shum:
From the Hagen’s recommended book list is “Rich Dad Poor Dad”. They claim that the most meaningful lesson they learned from the book is…

Justin Hagen:
I do think the leverage. When we started investing we asked “how do I leverage that money?”, “how do I buy an investment property?” or “how do I buy something that I can then leverage to then buy something else?”.

Alice Hagen:
Yes you don’t necessarily have to have your own deposit.

Justin Hagen:
And I think that’s probably the biggest thing that I learnt. And obviously in a rising market or a market that you can pay for property and then go and speak to the bank again and get the property revalued and then look at using that as equity. That’s you know that’s probably the key thing that I learnt out of the book and you know I think it’s a great take away.

Tyrone Shum:
The Hagens believe that their determination and goal-focused mindsets are the biggest contributions to their success.

Alice Hagen:
I think our determination and just that we’re just really goal-focused. Yeah. We’re not after an overnight success. We’re all about developing up to reach our goal. Like our perfect example is our most recent long term goal. We just said we’ve just been able to accomplish so just sticking to setting long term goals, keep reflecting and keep working towards them.

Justin Hagen:
Yeah I’m the same, I’m continuously setting achievable short term goals to contribute to achieving a long term goal. I think that’s the main thing, to reward yourself when you achieve those short term goals and then obviously to have a path to get to that long term goal is very important.

Tyrone Shum:
For such rewards, the couple are simply looking forward to spending their time as a family with their children, opting to go travel together during the holidays.

Alice Hagen:
I have to admit that we have only started rewarding ourselves recently. And yeah that’s a lesson learnt from us that we didn’t actually give ourselves enough acknowledgment along the way.

Justin Hagen:
And we’ve went on a couple of great holidays in the last 12 months. I think just actually spending… For us, reward is spending time, taking time out with the kids and just sit back and take a look at what you’ve achieved and then look forward to see what you know what we can do and I think for us holidays with the kids is a great reward. There’s other little bits and pieces. But that’s the main focus is just you know time and being away with the kids is great.

Tyrone Shum:
If you would like to connect with the Hagens, you can reach out to them via…

Justin Hagen:
You best probably find me on LinkedIn. I’m more active on LinkedIn than I am any other platforms And our company, you should follow our company. Calibre Real Estate on Facebook. And yeah, we’ve got information going out for landlords, tenants buyers, sellers. We raised a lot of blog articles weekly so if people want to just get on have a look at we’re about to follow us.

Tyrone Shum:
Thank you to Alice and Justin Hagen, our guests on this episode of Property Investory.

If you want to hear more about their journey, visit our website at www.propertyinvestory.com. Simply type in the search bar Alice and Justin Hagen and select that episode to learn more about their story.

Also, if you haven’t subscribed to receive your free property case studies that I only send out exclusively via email. You can text me your email address to 0499 88 10 40 to subscribe. These real case studies are from experienced property investors where they share specific numbers of their portfolio, the strategies and much more. Simply text me your email address to 0499 88 10 40 to get your free case studies. Thanks for listening!

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