Hosted By Tyrone Shum

The Home Buyers Property Investment Strategy That Works

Updated 20/02/2019

Alex Dutt has had numerous successes in the property industry ever since first getting into investing in property in the early 2000s. With an accounting degree up his sleeve and not yet well versed in the property industry, Dutt’s life changed when he decided that property investment strategy was the way to go.

Join us in this episode of Property Investory where we talk with Alex Dutt to find out about how he got inspired to start a career in mortgage broking, property investment and real estate, how he became inspired to help the average investor gain more equity through developments, the learning curves he’s had along his own property journey, and how he’s become a smart investor and developer through it all!

"It's really about targeting real quality assets and making sure that you know you're buying again things that people are going to want and is going to go up in value."
-Alex Dutt

Working as a buyers agent, investment advisor, and mortgage broker for more than ten years, Alex Dutt is well versed in the property industry... 

I have worked on I guess a variety of different aspects within the industry…

But I started out in mortgage broking and then worked through into property investment or real estate direct. So selling as well so a bit of that and then ultimately I was a buyer's agent so I've kind of I guess been on all kinds of different sides of the fence and I've seen yeah just the industry I guess from all angles. So it has been really helpful in doing what I do now.

With clients to talk to, properties to research and events and workshops to run, a jam-packed to-do list is not out of the ordinary for Dutt… 

I help investors buy and developed residential properties around Australia and to help homebuyers purchase in Metro Sydney. So that's I guess at a high level but what that actually means is that I'm pretty much most of the time I'm glued to the laptop with my air pods stuck in my ears and I'm researching properties and talking to people on the phone or otherwise about inspecting properties meeting their clients and also run a lot of workshops for property investors as well.  

Despite property research being a hefty and long-winded process, Dutt shares that with a good team, a clear end goal in mind and a systematic approach to assessing a property, research isn’t as burdensome as it seems…

We do have a team so I can't take credit for doing all the research myself. I guess I think the most important thing is to understand yourself as an investor and I know that kind of sound that it may sound a little bit ethereal but I think that it's really important to understand what you want out of property investment before you even start investing. So understand I guess a lot about yourself and your own risk tolerances and also I guess your goals and what makes you feel comfortable when you sleep at night. Schachter because I think that can really determine rightly or wrongly what you end up buying. So to me of going through that process and understanding what you own at one out of the exercise before you start even researching is absolutely critical because it's going to determine where you end up. How you approach it I guess but I suppose we take a pretty high-level approach not to understand the investor and start looking at again understanding risk profiles and so on. But looking at what's already in your portfolio you know what what what your budget is obviously that's going to be a huge huge consideration as to where you end up. But then we've got a system that we look at just basically 10 things that we look at from a macro standpoint and then we drill down into the property itself. So again it's a big job but I can't stress it enough that it starts off on where the investor sits in terms of how you're going to approach it.  

He adds that another aspect that makes the research process easier, is taking a logical and methodical approach that doesn’t involve overthinking every decision… 

I also think it's important that you don't overthink it as well. I mean that's one of the things recurring themes I guess working with investors over the last decade or so has been the old analysis paralysis where people overthink it they get caught up listening to in all the different opinions and all the noise out there and not following their own instincts and I think that's really important. You know I'm sure I'll share a story with you later about kind of my own experience doing that when I went I just started out investing it in trust management. 

So it is easy to be misled I guess.  

Growing up in Sydney’s West, Dutt shares that he’s seen a lot of change in his hometown over the years… 

So I grew up in the west of Sydney so started in Newtown then and now like heart and ultimately Balmain where I've lived for 30 years. 

So I started to I mean give me an example I started high school in 1988 and finished in 1993 and during that time the high school at Balmain basically halved in student numbers because the area changed so much and a lot of the people moving in send their kids to private schools and so on. So it was really a drastic change over that time. 

Gosh is that still the case now in Balmain?

It's still the case in terms of affluence that's for sure. Yeah, the schools that I don't think meant high school still called that anymore. 

It's now that the Sydney Secondary College I believe.  

After completing his secondary studies, Dutt fell into various work roles before being convinced by his older sister to take up accounting in TAFE… 

When I left school I had absolutely no idea what I wanted to do and I kind of moved around a variety of jobs and I did all kinds of things landscaping, work in mums restaurant - she had a couple of restaurants out of a pubs, and you know I did a bit of graphic design because I could always draw. I did that with my Uncle because I really had no idea. You know I'm really honest I had no idea what I wanted to do. And then my sister Tash, said look I think yeah maybe you should go to TAFE. And I went and studied accounting full time for a year. I actually didn't use that but it was actually really good because it gave me a grounding in numbers and their analytical side so it really appealed to the analytical side of my brain. And then from there, I ended up kind of moving towards mortgage broking for whatever reason but I guess it was quite fortuitous because it gave me a really good understanding of you know and exposure to the I guess the realms of property investing.  

It was after completing his studies and falling into mortgage broking that Dutt realised that it was the problem-solving aspect of investing and mortgage broking that drew him further into the property sphere...

Working as a mortgage broker it just gave me a really good introduction into the way the mindset of a property investor but also it really tapped into I guess one of the things that I really like about what I do and that is the problem-solving aspect so I got I guess dropped in a deep end because I work with a lot of property investors so I specialize in property investors where I was working and then I guess you're finding the deep end but I got to see what a lot of people were doing from a success standpoint so it made people money but also I guess some of the mistakes that investors were making. 

So you know I saw I definitely saw some patterns there and recurring themes and some things people were doing from a property investment standpoint but I also most importantly as you've touched on I really got a firm understanding of how critical it was the thread between lending and property investments property and lending in our business. 

A crucial aspect was. 

Yeah, it is pretty much the backbone of it without funding or any funds to be able to purchase. You can’t do anything much more than look at a property and go wow this is beautiful. 

Absolutely, it gave me a really good kind of understanding and basis for the advice that I was able to give people over the years as I moved into the property investment-specific stuff. 

However, despite being a mortgage broker for several years, Dutt admits that it wasn’t his true passion...

I did that for I guess trying to think probably a good four or five years. I mean I did, I did enjoy it. Again I like the problem-solving side of things and I liked helping people enabling people to buy a property but it was never I'd be lying if I said it was truly my passion. I kind of again use it as a bit of a springboard to move into direct real estate which is where I really get a really really excited manner. I like that aspect a lot more. 

He explains how working as a mortgage broker for five years allowed him to move seamlessly into real estate… 

There’s a little bit of a story I guess between the businesses and how they intertwined and so on and how that kind of panned out at it. I mean it just seemed like a natural progression. So I was fortunate enough to be in a position where I could transition to another business. I ended up getting my qualified property investment advisor qualification which is trough PIPA - the Property Investment Professionals of Australia so I was one of the first handful to do that. And that enabled me to work for a business that provided independent property investment advice and do education and things like that. So that was I guess the next step to be able to get that again independent advice and facilitate workshops and things like that dealing with investors. 

And since you completed that qualification and you start working with the clients, was it an easy transition for you or did it sort of just go oh well you know this completely different to what I've been doing?

I guess there were definitely some common threads. 

I think that I think it'd be really difficult to be able to give property investment advice if you didn't have that really solid understanding of mortgage broking I'm not saying you need to have been a mortgage broker, but I think that I would have really been start struggling and giving people advice had I not known the inner workings of mortgage broking. And I mean I'm kind of one of those annoying people that likes to ask a lot of questions and everything works. And I guess yeah for me that's kind of prompted me to get a variety of qualifications as well so I've also done the financial planning qualification just so I can understand how other assets work and other investment asset classes work and one of the other things I really don't like from a sales standpoint I absolutely hate it is sales rhetoric, you know so just kind of these things that are bandied about that people say you know don't do this don't buy shares that risky or you know this or that you know really kind of that stuff. So I really want to know when people say don't do this or don't do that. Why are they saying it? So I want to delve deeper.  

He adds that by satisfying his thirst for knowledge and gaining the answers and information, he has been able to help others achieve their property goals… 

It sounds a little bit kind of self-serving but it really was that everything that I was doing was always moving me towards I guess collecting qualifications but also know-how so I could be in the best position to help clients. And I'm sure you're sitting there saying well you would say that but it really is this case. So I mean I guess being a buyer's agent to me gives me total flexibility to be able to sit down with someone and say okay well what is it that you need? I understand what their goals are but I understand the position they're in I can understand why they're picking property as an investment and make sure that it is the right investment for them in knowing what they're trying to achieve and then basically because we are licenced Australia wide so really we've got a blank canvas. It’s not to say we're buying Australia wide we're not always buying and every state based on cycles and so on but at least we can sit down with a blank canvas and understand okay if they've already got a property in Melbourne they've already got you know one in Sydney? Maybe you know they look elsewhere or vice versa. So but really we can sit down and tailor the advice that we're giving and because we entirely fee for service as well. We're totally independent. 

So essentially we're looking at it with again a blank canvas and we can help them achieve whatever they're after.  

Asides from mortgage broking, real estate or giving advice to people as a buyers agent, property development is another area of the property that struck a chord with Dutt...

I guess one of the things I mean I had an experience like any anyone that's had any kind of interaction within the property investment industry ultimately they're going to see the project marketing side of things and how that works and how you know buying directly from developers works and so on. So I quickly understood you know-how, how that equation worked and who got the better end of the deal and a lot of times in most cases it wasn’t investors. So it kind of led me to understand well okay developers are making a lot of money out of this. They're often driving very fancy cars and you know they're making a lot of money instead. So how do I kind of I guess deliver that, that same concept to investors? And you know I guess a lot of cases buying retail investment off the plan or a house and name package - I'm not saying across the board - I'm just saying you know a lot of cases it doesn't actually serve the investors best interests. 

So I wanted to I guess create a means that investors you know the average investor that didn't have huge amounts of capital how could they tap into that type of development opportunity to get themselves create themselves a bit of equity. 

He explains why this understanding has to lead him to believe that house and land packages, as opposed to developments, aren’t always the best for investors… 

I've got my own opinions on what makes for a good investment and I mean the fundamental principle that I see from an investment standpoint is you always need to buy something that's in very high demand. And ultimately I mean I'll be the first to admit I'm quite a risk-averse investor. So to me, you always want to buy something that you can sell immediately. So if push came to shove, life happens to you and you needed to sell quickly, you want to be able to be in a position where that what you've got is highly sought after and you can liquidate quickly. With a lot of cases with off the plan or house and land, you're basically buying with a lot of other investors and you're buying something that's in an untested market. It's not always the case, I mean if you think of a house and land package buying in a greenfield state may or may not have the infrastructure it doesn't quite have the owner-occupied demand yet because the schools and so on and all that kind of structure that is essential infrastructure isn't quite there yet. 

So you're resale markets just not there to support a purchase if you had to sell it. 


So to me it means that really that's really critical that again I can't stress it enough it seems blindingly obvious but buying something that you know is in absolute high demand and people desperately want, to me that's really important and I think that in a lot of cases that you know house and land or of the plant stock just doesn't fit into that category. 

Yeah, I understand that. I was thinking that it is it possible that there are other margins factored into place like commission fees in any refill fees, that kind of stuff that's why makes the. 

Oh absolutely. What did that mean to me? I mean it's a it's no secret that you know that the project market has make anywhere from 30 to 50000 even more. Or is it more per house the land package so someone's paying for that. I mean I mean property market as you know very I guess good at their jobs and you know providing reasons as to why you know to justify these high fees and a lot of them might say that's built into the construction margins and it doesn't impact the investor and so on but I mean you only really need to to do a comparable market analysis and say okay well if I were to buy through this bite yes I'm going to buy brand new and there are some benefits to buying new such as depreciation deduction and so on. But to me if it's going to take you five to 10 years to recoup your outlay because you've know you've overcapitalized or you've bought something that there isn't a resale market yet for then you know that five to 10 years to take worth of depreciation or whatever benefit you've got along the way from a cash flows standpoint goes out the window. 

I mean that's just a very general that doesn't look like that across the board but it's just a very you know generalization.  

Thinking back to the past, Dutt admits that while he didn’t have an initial interest in property while growing up, watching his mum tackle renovations and the like, did inspire him about property in general… 

I wouldn't say that I was interested in you know to be really honest but I did definitely parents split up so you know mum watching mum buy a family home and did the renovations herself and upgrade you know along the way so from kind of Newtown to an adult-like and so on so you know that was quite inspiring looking back to see what she did and you know she did a lot about supporting three kids at the time and doing it herself. A lot of the renovations herself and kind of riding the markets that way. It was at this was during the 1980s. So to me, that was pretty inspiring.  

He adds that whilst this exposure didn’t particularly strike a need to invest given his young age, he did gain an appreciation for his mother’s hard work...

I guess also the idea that I mean to actually invest in the property was was was not a concept that at that time really kind of entered my life. 

home buyers

Processo I mean yeah it was it never really occurred to me growing up you know that as you know as a tenant as a renter you were living in someone's investing property and never really can put those two together growing up so I can't say that from an early age I was really that in tune with how it all worked and you know not many people that I knew in my family-owned investment properties as far as I knew and definitely aspired to find their own home and I guess you know making the most of that through innovations as I mentioned.  

In regards to his own property journey however, Dutt shares how he got into the property market and the reasoning behind his first investment purchase… 

I was in pretty early stages of probably, I’m trying to think, tying in just before I guess I was involved in mortgage broking. So my partner at the time was pretty keen on planning for the future and we ended up buying an investment property and to be fair she was definitely the driver of that. I mean I applied I guess what limited knowledge I had at the time but it was a bit of a crash course in property investment that's for sure. 

He explains that it was his ex-partner’s desire to buy a house for investment purposes rather than a home, that led to their portfolio building… 

Purely for investment purposes. 

I should clarify we already had a home. She had her own home and then we were teaming up basically to buy an investment property. So yeah gold definitely was to build up up a portfolio and use that as the retirement gap. But again as I said it was very much a crash course at the time, so I did a lot of reading and getting my head around some real foreign concepts. So this was in the early 2000s. You know it was definitely an interesting time from a property standpoint but yeah I mean that kind of ties in with probably I guess one of the you know one of the worst investments in terms of how that all played out.  

And the process that occurred before getting that first investment… 

We had a little terraced house in Balmain. So we kind of had the home all set. But we were kind of looking at you know the standard I guess default for a lot of people is to buy in their own backyard. So I guess we looked at units in the Balmain area as a bit of a because that was all we could afford the kind of around that low low low $400 000 mark which was a lot and quite a bit a lot of money back then but still is. Absolutely it is though. Back then it was more cost but we looked at it I guess that was the benchmark so we kind of compared okay we can buy to better not far from the water in Balmain it's going to be an old you know 70s block nothing fancy but it’d be a decent size going at 70 plus square metres. So that was kind of I guess the yardstick. But someone that we'd met had recommended that we speak to a mortgage broker. So again this was before I was broking at the time, so kind of doing all of this and hold that thought put a pin in that because in saying that that was integral to me kind of getting into to mortgage broking and then they kind of referred us to you know so-called property person and basically talked us into looking at Queensland. So we were you know we weren't really, pretty uninitiated. I didn't really know what we were. What we wanted out of but we didn't know entirely what we were doing was all very foreign as I mentioned. We had our own thoughts but you know we were meeting different professionals, so-called professionals and trying to understand how it all works and what you can do so as we were very green and we made it we definitely made a mistake. So of course you know you can get it you know where the story is going so either had a unit in Balmain or we could have bought something in Queensland and we were looking at it from a value proposition and well again a two-bedroom unit in our name we can buy you know a big home four-bedroom home three bathrooms on a 700 square metre block in Queensland and of course we went for the home thinking that was what made sense and we listened to the amazing story about whether that particular area is going. I mean not having known the area at all and just following someone's recommendation and I don't you know I don't mean to pass the blame and say you know it's someone else's fault we take full ownership in. I guess our decision but again we didn't get great advice. I know that that in grade and we just made so many mistakes with that purchase you know and the list is a mile long.  

Thinking back to the downsides of this initial investment, Dutt explains what happened overall… 

I mean I appreciate the hindsight Vision 2020 statement go back and say we should have bought the one in Balmain because it’d be double and a half times in value but. I guess that the place that we bought it just wasn't mine. Again that rule of thumb that I have that you've got to buy something that people desperately want wasn't there. Know there was an oversupply of stock a population just never reached the point where it was going to mop up the soak up the excess stock. It's still not there it's not going to be there for 20 years this is in an area halfway between Brisbane and the Gold Coast you know. We listen to it. 


We listen to tales of you know that whole corridor is going to fill up and it's going to get soaked up by population growth and so on and then you add you know talk of the Olympic Games and all this really crazy stuff. It sounds stupid repeating it now but you know again we didn't you know we thought okay these people are professionals they've got their best our best interests again sounds very naive but that was you know I guess when we were out at the time and I mean again the lesson was it was really good for me because it gave me. It wasn't great financially but it gave me a bit of a shock to the system prompted me to get in to into the industry and I thought look if these guys are doing this and you know and I'm not impressed by how they do things and you know I can definitely do a much better job. So it was quite fortuitous that way. 

"Being a buyer's agent to me gives me total flexibility to be able to sit down with someone and say, ‘Okay well what is it that you need?"
-Alex Dutt

Despite the first home buyer mistakes that were made, Dutt adds that in the end there wasn’t much loss and a lot of lessons were learned.

The other thing was I mean apart from I guess buying at the wrong part of the market cycle buying we're kind of we're just fortunate and got the right property types so a high set for bids so two-story four bed three baths with a double lock-up garage. But we made some kind of other silly mistakes like we bought a 700 square meter block which is a big size parcel of land but it was on a slope so a lot of the yard you couldn't actually use. So I was kind of you to know may well have been much smaller block but right down to I guess even building to an older building style construction style so we'd exposed brick by the time by the time we even do it even before it started. Everyone around there was wanting rendered brick so it's just little things like that that made a big difference from a resale perspective. So I think we ultimately sold the property and broke even. But again you know I feel like I always always feel like I almost got thrown a dart at a map of Australia and picked an area that would have performed better than that one again. 

You know you look at hindsight visions 2020.  

On another note, Dutt shares that there have been many aha moments over his investing strategy journey, most of which have allowed him to learn the do’s and don’ts of investing, and have also allowed him to teach his clients the same things… 

I mean having worked with investors over 10 years I've seen a lot of them. And again I come back to my comments before again it seems blindingly obvious but just buying something that people desperately want I know I've said it already about three times in this presentation but you know if you're not buying something that is in extreme demand combined with extreme scarcity I don't really understand the point on this and I don't mean to make blanket comments but some of the things people look at like DHA homes where you know you the only market is going to be investors you know to me that kind of stuff is never really going to take off. You know you want stuff that first home buyers second home buyers third home buyers whoever they just absolutely want it on your hands. And sometimes it can be hard to pick out ahead of time. You know if we knew the answer that you know every time obviously we'd all be very wealthy. But to me if you're not that from the get-go there no I just don't understand why you're buying in the first place but I guess the aha moment the other one is really quality over quantity you know and I hear a lot of people talk about almost measuring their success by how many properties that they have. You know and it's kind of like well you know I've got 15 properties I've got 10 or whatever the case and I look at some kind of you know that's almost their goal but combined with different levels of debt and so on or different I guess where the properties are located at all are irrelevant. So to me, it's really about targeting real quality assets and making sure that you know you're buying again things that people are going to want and is going to go up in value. To me, that's the most important aha moment. But the other thing was again based on my own experience you know being absolutely ruthless about who you trust and you listen to and whose advice you follow. You know and again there's so much kind of out there you know in the real estate industry as a kind of cutting through it and understanding of what's everyone's agenda why are they saying this and what they're steering me towards that or. And so on. You know again sounds a bit kind of like you're a bit of a skeptic I'm a bit of a skeptic but you know that's a guess based on my own experience even working in the industry just seeing how things work. So to me, I can only imagine if you're you know a consumer not seeing all of this behind the scenes you know trying to navigate that and make sense of it all. 

Alex Dutt on Supercharging your Portfolio with Developments

home buyers

Jumping straight into the mindset side of things, Dutt gives us a little background information on why he decided to build a property portfolio and work within the property industry...

I like the idea of planning for the future. You know having seen I guess firsthand people that didn't plan for the future you know to me, I guess the consequences of that forced me into action. So to me, that's really really important but I actually property itself although again it wasn't necessarily my decision to get involved in it. I mean I was but I wasn't the driver as I mentioned. I have definitely become very passionate about love and I love the opportunities it creates and I also as I mentioned as an asset class I loved the fact you can be so hands-on and do things with it that way. So I do you know renovation is another passion of mine I'll be doing another renovation next year. So to me that's you know that was one of the motivations.  

Continuing on from the previous segment with Dutt, he delves further into the types of strategies he’s implemented throughout his journey, specifically in regards to developments… 

The initial one was a house and land package - so I guess you could call that a development we started from scratch. Kind of seeing that again wasn't a great success so I'm not hanging my hat on that but it did I guess give us a bit of exposure to how that all works. The next one was a townhouse also in Brisbane, we bought that from an affordability standpoint. That one actually almost doubled in value and we sold that actually before the market went back so we made well out of that. So this is another thing I guess that I [should] just kind of mention - that I think that you know there's nothing wrong with actually selling and capitalizing on you know your wins in the investment in journey along the way I think you replace them with another investment it can work out quite well. 

So I hear that a lot of people suggest you can never sell or something like that. But in my experience you know it can be great you know a great benefit to selling at times. But we also did a purchase we bought some land. Did a subdivision in Victoria. So [we] built from scratch there, I saw the land and then found a builder and did all of that went through that exercise. We didn’t make a huge amount of money on that one but it kind of gave me a bit of a taste for how much you know how you could make money through small scale development and that was something as I mentioned, coupled with getting experience between, behind the scenes dealing directly with developers and seeing how they work and even investing in projects from a wholesale level you know tying that into how we can you know how the average investor can make money on a small kind of development.  

He adds that while he didn’t necessarily build a network of developers he could take his clients too, this experience did allow him to offer his clients interesting advice and assistance...

To me it's you know I kind of reverse-engineered it and said I mean I didn't want to I guess be working with developers in the sense that you know I'm offering I'm bringing clients to a developer that's not what I was about it was like ‘How do I make the individual investor develop it themselves?’ So I wanted them to have you know 100 percent control over their own project and be engaging directly with the professionals. So I guess the word developer - Again I'm not dealing with developers, nowadays it's okay, ‘my clients are developers,’ so they know they're not full-time developers are part-time developers but those investors are private investors they're developing their own little projects so little projects I mean we're still talking in the millions even but in the grand scheme of things they are relatively small scale development but they are sourcing the land or sourcing the site and doing demolition, performing subdivision, and then rebuilding to cater to the local market, but that's always residential that is involved.  

With council rules, zoning requirements and land sourcing expertise required to execute these types of developments, Dutt shares how he brings about these finished projects…

To me, I mean it all and everything hinges around the site itself. So sometimes it's blocks in vacant blocks but for the most part, it's you know we're buying in established areas where we can. We know what we're looking for and we can find sites that we can put our criteria on and see if they make sense from a development standpoint. So like you said there are a million and one moving parts and there's a lot to consider and there's also a lot of different things that can go wrong. So making contingency is an allowance for that but it's I think it's a natural progression. I mean most of the investors I've worked with over the years you know start off with a buy and hold - the standard established residential purchase 0 and then they look at okay whether it's you know that they're second or tenth property they kind of get to a point where they're like okay, “I want something a little bit more hands-on,” and that could come right back to doing you know just doing a renovation. 

I mean I really like one of my favorite things about property as an investment vehicle a real estate as an investment vehicle is it. You can be very hands-on with it. You can actually get total control and if you want to improve it through renovations or even development knocked down and rebuilt multiple dwellings on the site you know you can do that. But you know there's a lot to know even yeah we've got the innovation you know there's so much to know before you can get started with that.  

"I'm not saying development is going to replace capital growth or any fundamental reasons why you're investing, but it's it's an addiction."
-Alex Dutt

Adding to this, Dutt shares the investing strategy he recommends to his clients when they decide to go down the hands-on route and add renovated properties to their portfolio…. 

I guess one thing that is worth recognizing is that with the new lending restrictions courtesy of APRA and the Royal Commission into banking misconduct I mean borrowing and being able to actually borrow to purchase property and even develop the property as a real commodity it's a real advantage for investors. 

So if you are able to use that strategically you're going to get a real leg up over a lot of home buyers and also obviously it's quite a complicated time-consuming exercise, so if you're able to get your head around it and do that then you know people pay an absolute premium for the end product. I mean we're just in the process of doing right at the moment for a client in one of the inner city suburbs of Brisbane. And the local unoccupied market I'll just eat up what we're building and it's a very well established pocket. So again we're not doing Greensville or anything it's very much you know this is one of only a handful of developments in the entire suburb about you know 3000 odd homes. But the idea is that we buy an old home, on a big parcel of land that we know can be subdivided so we have a whole bunch of criteria that we need to go through you know to cover off on meeting Council requirements and so on. And also just suitability for subdivision and construction and so forth and then knocking down the homes splitting the blocks - turning one lot into two lots. And then building, in this case, it will be two very big unoccupied homes there'll be about 270 square meters, two-story five bed three baths not over overcapitalization but still a quite a good nice level of finish but very much catering to the local unoccupied resale market. So there's still rent who will hold them for the short term to alleviate any capital gains tax and GST implications. 

They'll still rent very well. So that’s the strategy.  

But with so much to consider, how exactly did Dutt come up with a way to find locations where this strategy could be successful?

Every council is different and it's not going to work in every area based on where the markets are at. And in some areas, it's just cost-prohibitive. I mean Sydney is a prime example of that. It's only got to work in a handful of councils in you know in Sydney, it doesn't work too well in my own backyard for example. But I guess the idea is that we're buying. With the development and we've got to approach it quite different because we've definitely got to look at that resale market again. I say that's important for everything but I feel like it's even more important for development. Because you don't want to be if you're going to be investing in a project that's you know one and a half to two million dollars, you want to be make sure that you've got an out if you need to say you're building something that you know you can sell upon completion even though you may end up as I said to alleviate capital gains tax and GST you end up holding for a little bit longer. But the important thing is that as a developer you can you're starting from scratch so you can really hone in on building something that really ticks all the boxes in terms of what owner-occupiers or the local resale market want. So you can be very, very specific. So you can totally manipulate what you've got. The area obviously is very very important because again you've still got to tick all the boxes from a capital growth standpoint. 

I remember talking to someone actually at one of the Expos within the last year or two and we were talking about development profits and I said look here's one we did recently you know the projects cost us around one point three million and made the investment one hundred and eighty thousand dollars on completion and they said well you know I bought a property in Sydney and it went up in value that much in the last four years. And I said well yeah that's fantastic but I'm saying we're still doing development in areas that have growth potential as well. So it's still got to tickle the same capital growth boxes as well. So I'm not saying development is going to replace capital growth or any fundamental reasons why you're investing but it's an addition. So you know it's a way to supercharge your investments and strategy so same with renovation show renovations are a replacement for an investment strategy in my mind but it can really supercharge your strategy. 

home buyers

With this in mind, Dutt explains the upsides of holding onto recent developments… 

I mean not only are you creating equity as well but in this case you're also creating rent. So you're creating you know increasing the rent return on the investment properties so again it's not you know buying for yield is not a reason to buy an investment property as far as I'm concerned but obviously it makes it a lot more affordable to hold. Coupled with obviously a better depreciation because you're building news you're getting depreciation and you're savings got a bit of stamp duty. So there are some benefits but most importantly you're being hands-on and you're creating something from nothing and that idea really appeals to me. So you're still using leverage. So you're still borrowing to purchase the site and borrowing to fund construction and things like that through standard residential lending. So you're still using everything - all the benefits that property investment has to offer - but you're just adding you know adding an extra element which is creating profit from nothing so that to me that's really appealing.  

However, while all this sounds straightforward, Dutt explains that it is easier said than done and that there is a process one must go through to make sure any project is feasible… 

I think first and foremost it's an experience. So you can never account for all the things that I said that can and will go wrong. I mean every development is different in terms of something you know I almost feel like every time that I learn something new something different will pop up. But to me, it's experienced and also just being ruthless with the numbers. Again coming back to my original you know study as an accountant which was never something I never actually followed through. I mean I finished the course, but I never actually used it in my career - but I did tie back into my love of the analytical mind and love of numbers and crunching the numbers and times so it was quite helpful. So I guess doing a feasibility but just having a strict amount of criteria that you've got to go through and a tick box, and a process that you when you assess the site. So there's so many things that you need to look out and know about where you're looking at a site but also having all the professionals at your disposal and knowing okay who can I lean on to give me a bit of feedback in the initial stages? Whether it's a town planner, whether it's a builder, whether it's a civil engineer, whether it's a surveyor well those professionals that you're working with that you can say I can't decide, can you quickly glaze your eyes over this one and give me some feedback before before I take it any further? 

Continuing on with his strategic take on development, Dutt shares the few tricks he believes potential and active developers can use to ensure that they get the end result they hope for...

I think there are a few things you can look at but I mean I will say that obviously with development is a slightly riskier proposition. So you know it's with any investment it's a risk-reward adage. So the more potential for the greater risk the greater the reward. So development definitely falls into that category. So there are things that can happen but I guess there are tricks that you can use in terms of. Again just things like when you're constructing make sure you've got a fixed price contract. But really when you're I think I just can't stress it enough to experience so knowing how much things are going to cost and building and contingency and being restless. When you're from a retail perspective being realistic with your values. So I think to know one of the greatest skills is a buyer's agent if I may say so is being able to do valuations on properties and understanding what something's worth and whether that's not just the initial site purchase in development but it's also the end to end retail. 

So okay once the projects finish what's it actually going to be worth. So assessing the resale market no. And even without factoring in okay Mike the project might take 12 to 18 months but if you're looking at it in today's terms what is it worth in today's market. 

And to me, that's absolutely essential. So you've been ruthless with your valuation before you purchase so to make sure you play fair market value or less if you're good. Alternatively, when it’s complete the projects complete you know what is it going to be worth on completion and am I being realistic. And how did that time with my profit margins?  

Having provided that insight, Dutt also provides his take on what he believes is the average profit or return on investment that potential developers should expect...

It depends on the area and local council and how long it's going to take for you to hold the project before you get your way through a development application through approval should say through so. So I'd say for a standard entry-level kind of subdivision say around the one point two markets I'd account for somewhere between 10 to 15 per cent profit margin on the paper profit you can expect comfortably. So I think that's readily achievable. Obviously we aim for much more than that but I think that's pretty replicable. So in other words, if you spend say one point two million dollars on a project I think you can readily stand to make 150 000 spendings a little bit more. So on one point six I think you can push that close to the 200 000 dollar mark. But obviously again if you start developing to sell then you've got to factor in selling agent costs, capital gains tax, GST because it becomes a commercial process as well, so if you have if you're developing to hold just for the shorter term and whether that means you hold one for the longer term to two to see one cycles really hold both when you hold one and sell in the short term but just to get out of that, again you know that that small window upon completion. 

home buyers

In regards to subdivisions, Dutt explains where you can gain the knowledge to understand the intricacies behind them…

So there's going to be a lot of a bunch of professionals who are going to work really you know they're the professionals that you're going to need to engage you kind of touched on some of them before - so you've got a town planner you've got a survey you've got a civil engineer your town planner might engage some of those on your behalf. But also obviously there's going to be council and council fees. So every council is going to be different, but in a lot of cases, some councils are quite proactive in what they want people to do. So they're definitely encouraging people to subdivide and do these small scale development. Other people such as the inner west council where I live it seem to make people's lives very difficult if they want to do developments. But you know it's understanding the council and what the costs are. The other thing is that in a lot of cases the costs don't differ greatly from council to council. So I guess this ties into land values as well. So with doing developments, the reality is that if your lands very cheap your council costs may be the same to subdivide so it could be cost-prohibitive because I get asked a lot. People want to do subdivisions in the cheaper parts of Brisbane for example on the outskirts and they say I can easily find a site for four or five hundred thousand votes or subdivision potential unless well the Council Council cost alone are going to make the project not work and your resale market is just not there. 

I mean it makes no sense so I think developing as an approach. It's not going to work in every area. So you've really got to know the area and make sure that okay from a number standpoint does it actually stack up and is it feasible. You know is it a feasible venture does it actually make sense to do this in this particular area?

Thinking about the strategies he executes with his clients, Dutt explains whether there are any other types of developments that he carries out…

Most of my clients that's just stuff understood residential. So when I say standard residential I mean standard residential borrowing. So in some cases, I've got clients that have wanted to have access to the cash or commercial funding so they actually can do developments that enable more than say three dwellings on the site but most investors are restricted to standard residential non-commercial lending. Then are going to be stuck doing developments that I've only got the capacity to create two or maximum three dwellings on one site. So that's the bulk of what I'm doing is how it is as I mentioned a small smaller scale for most of my investor clients. 

Thinking about any helpful mentors along his journey, Dutt shares that it was his partner at the time that got him started in property…

I have to give credit to my partner at the time because she really was a catalyst for me getting involved in the property. But I did immerse myself in it. 

Once you kind of made the decision that we were going to buy an investment property our first investment properties were out of a lot of books in terms of mentors I guess to me it was just more really getting an understanding of how property work and just thinking myself in the whole inner workings of crunching the numbers and getting my head around how property investment works because as I said I touched on this numerous times. I am very much a numbers persons so understanding how everything works from a lending side of things a tax side of things that really interest me. So I made sure that I had a really comprehensive understanding of that.  

He also adds why podcasts and workshops, rather than books, have been more resourceful for him...

I don't read a huge amount of books say. I mean I spend a lot of time dealing with agents. I read books fairly huge amount of private investment if I'm brutally honest but I mostly just talk to investors and we run monthly workshops at advisable and just talking to other investors. Even though I facilitate them, for the most part, it's very interactive and we all exchange stories and experiences so to me that's really important as well. I do like to listen to podcasts. That's the stories I do. I really like podcasts and hearing people's stories about their experiences and so on. So to me, I get a lot more out of that just that you know people speaking candidly about what they're seeing out there in the marketplace and their own experiences and their own journeys to me. 

He shares an important piece of advice that has helped him and that could also help all the cautious investors out there…

At times I've been quite risk-averse and a bit of a self-confessed scaredy-cat and one friend of mine once said he said to me look at 80 percent of what you're worrying about will never happen. It might have been 90 percent or whatever it was the point was that you know for me as a naturally cautious person it just really resonated with me and it kind of gave me the impetus to take that leap of faith and buy that property or whatever it was in it and that even applies to business and other things so even though again I'm quite risk-averse sometimes I needed just a bit of an encouraging push and remember I came to you and I overthinking things are my way too much you know my kind of creating scenarios are highly unlikely to happen. 

And the interesting personal habit that has contributed towards his success...

I will admit that I'm naturally very skeptical and I guess that what I mean by that is that I do second guess kind of information that I get and touch on this a few times where anything that's being told to me I very much like to dissect it and analyse it before I make a decision or before kind of accepting something as my own belief. So to me that's it that's based on some of my own experience in property investing obviously along the way some of our journey and experience with good you know bad ones particular but you know it helped me understand you know how things actually work and most importantly you know I apply this to where I made my own situation. One of the other things I guess as an advisor. One of the habits I guess I've adopted is to make sure that you know I acknowledge that every single investor is drastically different in terms of where they are in life what they want out of this and their own risk profiles and so on. 

So to me, that's absolutely critical that everyone acknowledges that. So you know and that's why I think that things like you know your property first type of strategy where people look at you know people talk about the property the opportunity first before understanding people's circumstances and so on can be a very dangerous thing.  

Thinking back to the past, Dutt talks about the important piece of advice he would’ve given himself 10 years ago…

I think most vitally it would have been you know don't overthink it and try you know try to find that magic bullet. You know in terms of area you know I guess you get caught up in the idea that some far-flung area was going to boom you know and this may seem counterintuitive but there really was for me nothing wrong with my own backyard. A lot of people talk about rhetoric about you know don't have all your eggs in one basket and things like that which are the time I really took to heart took way too seriously and you know there's there is there know I'm not saying that that's going to apply to everyone but for me that was one big lesson. And also as I mentioned you know I'd say to myself you don't assume that anyone giving you advice knows better than you do you know what's right for you. But also know that your best interests at heart. 

He also explains why looking at the outcomes of the property market five years from now is what really excites him for his future property journey...

Obviously there's some pretty significant changes happening in the lending world and the impact that's havocking on all the property markets is quite dramatic. So I'm interested in how that's going to shake out because to me this is when the best opportunities are going to come up. And I know you know maybe the skeptical people out there are going to think that that sounds quite self-serving but I truly believe that you know the most the best stories that I've heard over the years about investors have made money those purchases when you know they take that leap of faith and they buy that property when everyone else thinks they're crazy. And when everyone's herd is I guess moving in one direction and you're moving in the other direction it takes a lot of guts to actually commit to something and be counter-intuitive or countercyclical. So for me personally I'm really looking forward to seeing how those opportunities shake out. I'm already seeing a lot of them in Sydney at the moment. So I find that really just really interesting.  

He adds that while he definitely believes luck has played a role in his success, skills and education has also had a hand in his success so far…

I do think a lot of it is luck. You know I'm not going to discount that. I think that I've had some bad luck but we're the first to admit that. But I think that I guess I've definitely got better at it the more I have honed my skills and educated myself. So you know I think that that's absolutely critical. You know and I think I look back and look at the mistakes that I made. You know they really were because you know as I just I didn't have a good understanding of what I was getting into and what I was actually doing but also I didn't have that confidence. So to me, that's really important as well.

This episode was produced by Ashlyne Ocampo with narrations and interviews conducted by Tyrone Shum.

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