Speaking to owner of Bradley Property Group, Dave Bradley, we’ll follow the property developer through his natural progression from accounting to property investing and market development strategy, hear how he was forced to deleverage during the GFC and how he turned $640,000 into $1.2 million within 18 months.
We’ll find out how a pitted rivalry between him and a co-worker - Steve McKnight - spawned a fruitful partnership; how their business grew to the point of financial freedom; why just saying ‘yes’ helped Bradley aim high in development; and how in missing his daughter’s birth, he discovered the power of cash flow.
We will also discover personal habit behind Jones’ success, and the books he recommends to help you achieve your property investment goals.
So who is Dave Bradley and what does he do in any given day?
You know when I fly overseas, I still have ‘chartered accountant’ in the letter occupation box that's there. So I'm still a member of chartered accounting, even though I don’t practice it; so, I stopped doing that about 10 years ago. I guess now I am what people would call a property developer.
I've got a particular stance with counsel. So I actually fight organisations and I fight bureaucratic processes; it feels like I do it right now. Typically what I do is I develop properties and with those I will take a piece of property, I will try to activate it by creating more dwellings and simply selling off the dwellings. All going well, that process will create a surplus, which is a profit which puts tea on the table for my family and I guess for people that I work with.
On a more holistic level, what I do is I run a business, I run money and I create wealth for myself and my investors and I do that using property as a vehicle and as a means to doing that. So a lot of the stuff that I do is more using my management skills and my business skills rather than my trading skills – which are not that good.
It's interesting you say that because a lot of us say we get on the tools and when they say the tools, it just means using their brain.
Yeah, get on the tools. My tool of trade used to be a calculator. So it’s the same thing, I calculate rate per square metre, or selling prices, or GST margins, or whatever that's the same. My tool of trade was a calculator. Which I'm lucky in a sense, being an accountant I'm pretty good numbers and so the calculator a lot of times is in my brain. But I do have one on my desk in case of emergency.
Due to his aptitude for trading, he says his property investing skills are terrible.
I reckon I'm a terrible property investor because I can't actually keep anything, I’d sell everything. I'm a trader, not an investor! So I'm terrible at that.
Despite not currently holding any investment properties of his own, building a portfolio of developments with Steve McKnight in the past has aided him in his success.
I think it's probably important to go back as to why that was the case; so when Steve and I were getting started – and I'm sure you’ve heard the story - we’d buy stuff for positive cash flow. So you can go buy property and it would put down some money with sign for a loan and it will create a passive income or a positive cash flow result. The problem was that was really boring in a lot of ways; it was really successful and really boring. So we got to the point when we went, ‘What am I supposed to do now?’ And so, quite rightly you might say, we could be in a situation where the positive cash flow was quite a significant number, but then there was a question of, ‘And then what? What do you do?’
So I'll give you rough numbers: if you own a property you paid $100,000 for - and it’s spinning off $1,000 a month, week, year, whatever, doesn't matter - what do you do when the property’s worth $200,000 or $300,000 and you start going, ‘What have I created to sell for?’ Or the knowledge I suppose or the thought process was, ‘Well, why not sell that property for $200,000, I'll invest $200,000 and I’ll go do it again and again and again.’ So I started talking about the velocity of money and trying to turn a buck into two bucks, two bucks into four bucks and so on and so forth. And I'm still doing the same thing right now, it's just bigger numbers in different strategies. But that's with the game that I'm trying to play, the game I was playing 15 or 20 years ago, whenever I was doing stuff with Steve in the positive cash flow days.
So right now I'm busily in trading mode, as opposed to in whole mode. I'm also 20 years older than what I used to be as well, so I’ve also got one eye on my future saying, ‘At a point in time you're not going to keep doing that, so you can actually get wholesome stuff.’ I'm about to come round the board where I develop stuff, but I'll actually keep some of the stuff that I develop whatever that thing is. Whether it be a group of shops, or group of houses or what have you, where you actually keep and hold it for the registry.But I haven’t done that yet, that's like next week's game or next year's game. With the current round the board, if I quit my $200,000 and go at it again, it’s trading. The next one will be, ‘Right you've traded enough, now you need to retain some of this stuff.’
Bradley shares a little bit about where he grew up before moving to Australia.
So when I was 11 we came out from the north west of England in search of a better life. Initially, I was growing up and my parents were going through what was known as Thatcher's Britain, and in north west of England there was a lot of factories and mills and they were all shutting. The youth unemployment rate was something like 40% or 50%. My parents sought to immigrate to Australia as a way of getting a better life.
In discovering who he was as a person, he set himself the goal to become a chartered accountant.
We moved to Sydney and then a few years later moved to Melbourne, so I have very mixed memories of growing up. I don't necessarily have friends from prep with this sort of stuff because that wasn't my experience. What it did do is put a couple of virtues that were instilled in me from a young age. The first one was that I spent a lot of time by myself because coming out from England and not having any family here and didn’t make friends, I spent a lot of time just me. So I became very careful with who I was with, became very comfortable with what I did and I learned from a very young age that I really cared what other people thought of me because it was just me.
The other thing that was instilled in me from a young age, I remember my parents I won’t say fighting about money, but I heard them complaining about money. So I never had money. We never went without anything or like that, but I mean my parents sacrificed a great deal and we never had money. I remember saying to myself at probably 13-14 that I'm not going to do that. I remember one particular day, my mum had come into my bedroom or lounge room where I was and she said, ‘I’m going to take $50 from a bank card to pay off the Visa card.’ That was their financial plan or their financial strategy and at that time it was just to stay alive and I went, ‘I'm not doing this.’
So I had a friend at school and his dad was an accountant and I asked what accountants did and he said accountants would grease the wheels; behind all big businesses were accountants. And I thought that accountants made lots and lots of money, so at that point in time I said, ‘I’m going to be an accountant’. That was simple, that I thought accountants made lots of money, so I'll do that. So I went through and finished my schooling and actually went to start my accounting degree and I, long story short, ended up going to night school and working in a chartered Accounting Office. I was really fortunate that the chartered Accounting Office had lots of clients of which were super-wealthy and the common trait among all of them as they all owned investment properties. I came to a conclusion, I went, ‘Hmm, maybe there's something in this.’ That the thing about being rich is to be an accountant, but they all seem to have one thing and that's property.
From there he began learning more about property.
I was very lucky, I had a mentor who was a client from about 17 years old, who encouraged me to do things albeit that fell on deaf ears for a long period of time. Eventually, after I stopped doing accounting, I used to catch up with him and we'd talk about what had happened and why it happened and so forth and one of things he treated as a factor of success was being a migrant. Come back and you have a thing about being a migrant is having a migrant mentality and so people come to Australia because it's a lucky country – you have to succeed.
And so I still have that even today. My parents sacrificed a great deal for me to be here; Australia is built on a whole bunch of migrants and there's a mentality that they have because they come in to get things done. So I guess my growing up maybe not different to a lot of people or most people, but certainly instilled a lot of values and experiences that I draw upon to this very day.
Although there was no influence from his parents in terms of property, Bradley gained insight from his mentors and peers throughout his career.
I'd very likely had a client who was a big-time property guy, he passed away about eight or nine years ago. I would catch up with him regularly – not as regularly as I’d like – but just talk stuff. There’d be a lot of people you'd have to chat to because he took me to lunch one day, we had a chat about basically I like to think he was my rich dad – if you go back to the Rich Dad Poor Dad scenario. At the time I didn’t realise it, it wasn’t until later on. So I was really fortunate that I had a few exciting little moments where I went ‘OK,’ but I now look back and go, ‘They were fairly instrumental in informing my outlooks on various things.’ Even now when I deal with certain situations I will still go, ‘This guy Morrey, what would Morrey do?’ and that. I still see Morrey’s son, catch up every so often and have lunch with him and talk about all life up to so forth.
Every time I see his son I say, ‘Your father's an amazing man for what he did, you know how he reached out. I wouldn't be anywhere near where I am right now without your father and having crossed paths in our lives.’
As ambitious accountants, Bradley and Steve McKnight were working in the same firm when competition arose between the pair.
I was working in an accounting firm and I moved accounting firms, as you do. I ended up working in the firm which is where I met Steve. So Steve and I were the two managers and in hindsight, we were being pitted against each other as to who was the next partner. Except we spoke to each other and we both went, ‘We actually don't want to be your partners in this place,’ we both thought we could do better, which is fairly typical of people at that age who reckon they can do things better than everybody else. So, what do you do? You go and put your name on the door, you've got your own accounting practice and we're all set. But not every accounting practice was formed often in the business. A short time thereafter Steve came to me and said, ‘I don't want to do this.’ I went, ‘Well, what do you want to do, mate?’ And so the real estate business started off in very, very humble beginnings around the same time as the Robert Kiyosaki seminar - we listened to the virtues of positive cash flow and we started buying houses in Ballarat.
And so it went on. People at the time and later on said, ‘Oh well, anyone could have done that.’ And you’re absolutely spot on, anyone could have done that but not many people did do that. So there was something which clearly was stopping people which is more than just physicality. It's interesting when you come back and talk about stuff because people always looked upon an obstacle in their way. ‘Oh, it’s because you were an accountant that you were successful, it’s because you were in the right place, it’s because you invested back in 1999, it's because of this.’ It's never anything just because of them, it’s always something else. This is the case and I think that's one of the biggest things that stops people from doing it.
On beginning their own accounting business, they had no idea how it would take off.
So when we started our own practice, for a number of years we did the business model as we do in accounting fees and I would make an accounting fee for Steve to go and invest it. And before you knew it they wanted to hear our story, because we had quite a big success doing some things with various investments. So I think around the same time, propertyinvesting.com, the website was born. And since there was a business where people wanted more, the more investing we did the more people wanted to hear about what we did; the more people wanted to hear, the more money we had, which was spent on the more investors we had. This thing just grew and grew and grew and some of the things we did, even now, we are pinching ourselves going, ‘There's no way that should have happened.’ Writing books, Steve wrote the books which was the number one bestseller business book. It was tremendously successful and a tremendously rewarding period of time, and ‘We were just two accountants who had a bit of a crack,’ is my take.
It got to the point you achieve what is known as financial freedom, or financial certainty, or passive income goals, or whatever is that you get to. I got to a point where I said, ‘You know it's probably time, we both need to go our own separate ways.’ I still see Steve now and we’re good friends, just that the business part of our relationship had come to a natural parting. We still have a foundation together – with all the things that we're dealing with – and it’s a really positive thing that happened. But through the business part of that, we started off as a very simple thing. Just buying stuff to increase our passive income, that was how we started. Along the way learnt things: we learned about the velocity of money, a lot about leverage, a lot about skill set, you learn about the different market strategy and how things change.
Entering into property development occurred organically for Bradley, as he shifted away from simple renovations and towards building.
I was buying properties to rent, it was that simple. Then along the way a lot of these properties needed renovating, so we learnt how to renovate. Our second property we ever did was a house Steve and I renovated with Steve’s dad. I can’t remember what the budget or profit was, but the actual profit was nowhere near it. A lot of those renovation shows show some guy putting on a lick of paint and then making a million dollars, but that wasn't my experience. So our second renovation project was a group of flats, where the best thing we did was get a project manager into the actual renovation. I in this case became the manager of the manager, which is what I did particularly well and – at one point in time – the house in need of renovating had a backyard. So we cut off the backyard and, I forget the time frames but it was around this time I went off by myself. But he started cutting off backyards and I started buying backyards. Then I started building backyards and buying properties that could be developed into two townhouses, into three townhouses. It grew and grew and grew, and that's what I'm doing right now, is just developing.
I started off developing a business by buying a rental on rental properties and it grew from there. The only change I'm encouraged to have is this notion of, ‘Just say yes.’ So I bought my first apartment developments off a conversation I got from a real estate agent, who said, ‘Do you do apartment sites, Dave?’ and I went, ‘Yeah, why not.’ I knew nothing about apartment sites but the apartment site, I figured, was learning on the job. This is what I did - I made however much money I made on the project and learned a whole bunch of stuff along the way. So this notion of ‘just say yes,’ or you're never too old to learn, or the market changes in your life and so what are you doing to change with the market? So I learned from a lot of stuff off other people; I speak to colleagues now or people who are in the upward, ‘What are you doing to stay in touch with the market?’ Right now, today's date is in 2017. The market is a certain way, the market was different three months ago and therefore by deducing the market will be different in three months’ time, how are you going to change with the market? Whether that's the construction market, the finance market, the buyers in the market, overseas influences - there's something that's always changing, which is influencing things. Are you changing with it? So if you’re still doing what you were doing five years ago, you're expecting it to come back in vogue. Don't be surprised if it doesn't.
The worst investing moment for Bradley came when he was halfway through developing a property, at a time when the market was volatile.
The worst moment was post-GFC. I had two projects which were funded by one of the big four banks and straight off the bat, the bank said to me, ‘We are not funding your project.’ I had already signed the building contract; well they didn’t say, ‘We’re not funding you, so we're changing how we are funding you.’ So in a space of one afternoon or one morning of the phone calls going on a building that had a contract, where I signed a building contract with the builder and another contract with the lender. So my banker, my builder, doesn't really care where the money is coming from as long as the money is coming. So what that meant for my cash flow is it was about $1.5 million short in cash flow. In the next 60 days I realised that’s a seven-figure sum of money - which you go, ‘Right, that's nice’. This same major bank used to run an ad after the GFC that said ‘During the GFC, we were the first bank to really support people.’ Really? You guys were leading the charge running for the hills, as was my experience!
So there was one story when I actually got a call from the bank saying, ‘You have too much money out the door, we want you to deleverage.’ I can’t remember what the number was, I think I got about $20 million out the door and they said, ‘We want you to give $10 million in 90 days’ time.’
What! How can they do that?
Absolutely. So the worst moment is because if you come back and say, ‘I was in charge of the guy at the time,’ he was absolutely livid and wanted to go down there and do all sorts of unspeakable things and I went, ‘No no, there's a lesson in this.’ At the time I also wanted to do all those things, I'm not going to lie. But you go, ‘Hold on, that’s not going to get me anywhere. So what do I need to do?’
His next step was to deleverage, asking the bank to give him seven days to pull it together.
In seven days, I had valuations under my complete portfolio and I had a strategy of how I was going to decrease my debt. So I sent them a document that would have been, I don’t know, 60 pages long - a real estate agent’s valuation, backed up by sales and my plan of how I was doing this. Now for the purposes of explaining something, if you've got a property that's half finished it's really hard to sell half this property. So you need to finish the property and then sell it, you can't just sell something if there is a plan that’s not done yet. We've got a property that's got a tenant there for only three months, it’s an unoccupied property, there's no point of selling it now. You need to wait three months and sell it as a vacant property. That was all part of the things that I was doing. So what did I do - I sent this document out.
A week later I rung up the bank and said, ‘I was just checking you got my documents.’ They said, ‘Yes I have, but I haven't had a chance to read it yet’... ‘Excuse me? Hang on, a week ago you were about to pull the rug from underneath me, now you haven’t even had the courtesy to read my proposal?’ So I paused and I went, ‘So what does all this mean?’ This is what the market changes. So everyone gets given the same facts, everyone reads the same stories; it depends on how you interpret it. So this guy clearly, from the bank, had been given a directive to reduce lending for whatever reason whether they were scared about the exposure, or whatever had happened. I think by me attacking the problem and going, ‘There you go,’ I can see why this is a problem and as long as you’re going to solve the problem, I think like a bank - whether they thought this directly or just by default - they went, ‘Well, this guy is a good custodian of money, therefore we’re going to leave him alone. We’re going to focus our attention on the guys who we sent the letters to who haven't actually responded yet. They're the ones we're going to put our efforts into.’
From this incident, Bradley has learned a valuable lesson - that not everything will go according to plan.
It's my problem to solve and I’ll solve the problem. I could spend the next hour talking about the problems that I've had in business, where things haven't gone to plan and what you do. I think suffice it to say is that whenever I do a development deal now, one of the things I say to myself and to various investors who I partner with, ‘There’s only a couple of guarantees in this project and the first guarantee is it won't go to plan. There will be a problem.’ The good news is that I will work out what the problem is and I'll work out the solution to the problem.
But if you go into a development or anything in life thinking that you're going to have the best-case scenario, you can't be that surprised if something goes wrong. You've got to have some contingencies, some plan Bs and somewhat if this happens. What I see commonly is people believing in the best case scenarios, believing what people say or believing what they want to believe rather than, ‘Hang on, what happens if it doesn't go to plan? What are you going to do next?’ That's probably what I have learnt.
As with most of our guests’ stories, there was a shining moment where everything clicked for him. This was when he realised the power of cash flow.
I was going down this road of passive income and positive cash flow and I remember I bought something like three blocks of flats. I actually remember it really well, It was November 2001, I missed my daughter's birth because I bought these flats! So I remember really clearly and I've still got that story up my sleeve for her 21st as well. So I'd bought these three blocks of flats in Tasmania and numbers-wise, I had to pay $640,000 for these three blocks of flats and the rentals per year were just under $100,000. I went ‘Wow, this is a great resolve,’ and someone with the positive cash and little expenses is about $30,000 a year. So Steve was happy because we were making $30,000 a year - the people in the seminar were even happy because it was a great story with a nice feel good feel. And I sat there and I remember having a blue, a barney with Steve one day and I said, ‘We should sell this stuff’, and he said ‘No we shouldn't, we should keep this as positive cash flow,’ and blah blah blah.
I took it to the market and I sold it for a little bit under $1.2 million, so I turned $640,000 – I'll ignore the purchase costs and selling costs – into $1.2 million in about an 18 month period. So positive cash flow was the “a-ha” moment - it wasn’t that cash flow was important, what makes you truly wealthy is what I call a balance sheet bill, turning $600 to $1.2, turning $1.2 to $2.2, or whatever the numbers are. If you're getting something smaller it's turning your $10,000 into $20,000 and your $20,000 into $50,000 and you're getting started. You need cash flow and a lot of people preach cash flow. Cash flow is really important because that's what keeps you in survival.
My a-ha moment was what will make me excel at this quicker is this like net worth, my balance sheet, my books, whatever. If I can grow that at an accelerated rate, that is what will win me the game If you like. So what I'm doing right now is I’m doing exactly the same thing. The last property that I purchased for whatever money I purchased it for, I'm looking at it going, ‘How much capital I invested and how much can I turn it into as quick as I possibly can?’
Another important thing which Bradley realised was about timing in the property market.
There is never a perfect time. So in a sense right now, I'll go for a run with a few buddies and they'll say, ‘Oh great timing in the property market, it's an all-time high. You must be really happy!’ I’d say, ‘Terrific when I'm selling. It's not too good to buy though.’
It’s not that good to finance stuff, because I might pay $1 million for something that when the bank goes to value it, they’re going to say $900,000. So, ‘We’re going to give you money based on $900,000. What’d you pay a million for?’ When it's a hot market, I have to pay a million. So they go, ‘You want the market to drop then?’ I go, ‘Yeah, still can't wait to go get it finally, when the market drop.’ And the man goes, ‘Oh, I would not give anyone any money, call the money in,’ or ‘There's stuff you’re trying to sell’. So there's no such thing as a perfect market. There's only a few numbers of combinations and a few variables in there; and they are never all in your favour. There is always something that is problematic that you need to solve and that's the reason why a lot of people sit on the sidelines and don't get in it and justify the wait for it to be completely perfect.
That's the reason why it's easy to transact – or easier to transact – because people want to, it is something that stops them from doing it and I think that something is wanting to believe or waiting for everything to be perfect before you can enter the market.
The first rule of effective money habits is you need to spend less than you earn and not everybody does that. So that's why I teach my kids from a young age you earn some money, spend less than you earn and do something with the surplus. But a lot of those times people get into property because they go, ‘I don't really want to spend less money than what I earn, I just want to live life now’.
Dave Bradley’s Components and Market Strategy for Property Success: How You Can Make $600,000 by the End of the Week
When it comes to making the first move and purchasing that first investment property, Bradley believes that lack of money - or the fear of losing money - is what holds people back.
Whether the money is either capital or it's financed, the biggest thing that holds people back, of both those, is the fear associated with that. So if I said to a person, ‘I’ve got a deal for you and I want you to put $100,000 into the deal,’ the one thing that will hold you back is the fear of losing that $100,000. And if I say, ‘Why don’t you put in $100,000 and then sign for a million-dollar loan,’ you’ve got a fear of being called on the million-dollar line. So I think that's what holds people back. That’s echoed the fear of false expectations appearing real and so when I’ve tried to work through that, is to work out what are the chances, the possibilities, of that worst-case scenario actually coming true? You can sort of work out strategies for what you think is the case, or why is the case and put yourself at ease.
Over my time of doing all this stuff, there seem to be two things that motivate people - it's fear and it's greed. People come from two different spectrums - people smarter than me probably talk better on the two spectrums - typically though, what I find is that people want to do stuff but they become fearful of things. I don't know whether it's the fear of doing something new. When we were kids, we would do something new all the time. We would go to school and we’d learn a different skill each day; we get to a point where we stop learning that skill, or we stop learning that discipline of trialing that skill, so that we think we know it all. Whether you’re age 18, or 28, or 38, It doesn't really matter - you think you get to a point where you know it all. So I think part of it is to actually be open to saying, ‘Well actually, maybe I don't know it all. Maybe I can learn something else from this experience,’ and so forth.
So what held Bradley back from investing in property?
The greatest mistakes – my greatest mistakes – have been not going hard enough. It's never been something I've bought, it’s always been something like, ‘Man, I should have bought that’, or ‘I could've gone harder’, ‘I should've gone longer for that’. What holds people back is fear. Now that can be a bit of a self-fulfilling prophecy because they could have a track record of underperforming. In psychology, they’ll tell you it's because you don't believe you deserve it and I don’t know, there's a whole bunch of stuff that comes out of it. A friend of mine Brendan Nichols has this saying that the enemy of a great life is a good life. Sometimes if you've worked really hard to get the $100,000 then you don’t want to invest it because you know how hard it was to make it. You didn't have a $100,000, you’d just go, ‘Ah yeah, no problem.’
So I find this fascinating to talk to my kids about when talking money because their concept of money is not necessarily be formed. They will understand, ‘Oh well yeah, dad buys a piece of property and he knocks it down, builds four houses and sells them.’ They get that completely. There are some things that go wrong with what dad does every day at work. So this fear, you know, it's almost youthful exuberance, but they don't have that fear there. So the only thing that really holds them back then is the practicality of not having the money. But here's the thing with the money - and this is what I've discovered in more recent times - is you don't actually have to have the money.
So the first thing is these banks will give you the money. Then what’s happened in more recent times is the banks have tightened up with their lending procedures and other people, private investors, who've made money will go, ‘I just want a return on my money.’ And I actually would love to partner with someone who actually knows what they're doing, is a good custodian, may perceive it to be safe or the risks taken care of. There are people who will go, ‘I would love to give you money.’ And that's one of the things I've discovered in the last number of years is that there's an investor market out there that may not have the capital for a project, but if the project is any good, you will find the capital for the project.
Having built a good track record as a property developer has certainly helped with his success, but it’s also about being able to manage his money well.
With all that though, a part of being a good custodian of money is having effective money habits. So the first rule of effective money habits is you need to spend less than you earn and not everybody does that. So that's why I teach my kids from a young age you earn some money, spend less than you earn and do something with the surplus. But a lot of those times people get into property because they go, ‘I don't really want to spend less money than what I earn, I just want to live life now and I just want property to pay for the increased lifestyle I think I deserve, or want to have.’ Well that's OK, you might actually be able to do that for a period of time but there is also a chance that you're doing a business on quicksand - and you might fall over because you haven’t actually got sound fundamentals in place to start with.
To hone his mindset around property, he consults various people. However it’s also vital to back yourself when searching for mentors.
For property development, I rely on a lot of the consultants that they use for the specific technical knowledge. I catch up with a buddy of mine who also does this and we will talk on a more high level about our respective businesses; we’ll catch up on a probably quarterly basis. I also seek counsel from a couple of friends, more they’re keeping me grounded and seeing things from a different perspective rather than just getting caught up in the, ‘Buy something, buy something else, buy something else and keep going.’ Why it is that you're actually doing something. What is it that you’re actually trying to achieve and that sort of stuff. I don't necessarily sign for mentoring courses per say, I definitely seek people out.
One of the problems of this business is that you are seen as a leader by a lot of people who work underneath you for various consultants and trades or whatever else. So they see you as having all the answers, which is maybe true in some cases, but it’s not always true. How do you direct the ship in a way that you actually want to go to? So I guess you try to seek out other captains and find out how they're doing and how they're coping with things. But a lot of times in relation to reading the market, you can talk but one of the problems with talking to too many people... if you read the signs and read them a certain way, there's a feeling that I've developed where you actually trust yourself and your instinct, that if everything says that's OK then that's OK. Sometimes you can look too hard about, ‘Why is this not going to work?’ Which is what a lot of people do, all the things that could potentially go wrong.
With many people looking to Bradley for answers, he stresses the importance of owning his mistakes when they occur, fixing them and then learning from them.
I'm not afraid to put my hand up and say I made a mistake. I don't like making mistakes, but I'll put my hand up if I make a mistake and go, ‘I made a mistake. I’ll wear the mistake and I’ll do better next time,’ or whatever the case is. They’ll then tell you to fix the mistake. Which is not just blaming everyone else, it’s what we’re going to do. I find that if it increasingly feels like you deal with people and organisations and it's always someone else's fault, then no one will actually take ownership of any form. You actually get a lot of mileage from just actually owning the mistake. Now I get that organisations don’t necessarily want to preach that's the case, but if you stand in front of someone and go, ‘I stuffed up, I’m really sorry,’ there's not a lot you can say then, like you’ve got me, you're right; I did, I stuffed up, I’ve apologised for it. But what are you going to do? I'm now going to fix it. This is what the fix is - and the fix might involve more money in the project, it might mean an extra month interest, there's a whole list of things that it may involve. But once a mistake has been made I can't unwind it. So the first part of that is to actually own the mistake and accept responsibility for the mistake.
Now the next part you can do is learn from the mistake. Why did this mistake happen and what can I do to prevent it from happening again? Every project I finish I go, ‘What did I do well and what did I do poorly? What can I do better in the future? And so as the market changes, as the industry changes, the finances, everything changes, you’re still learning about what did I really do well? I'll give you an example: I've been to auctions in the past where I have been trying to be the alpha male and spent my authority on the auction - not necessarily being a thug but you know, I bid confidently; ‘Rawr rawr’ and being loud, with varying degrees of success. I went to an auction probably about 60 days ago and I tried a completely different tact where I was really passive and almost timid and it worked. We bought the property. It was definitely an easy auction in comparison to when you have to put on a little bit of bravado. Would I get the same results? We'll never ever know. But I can learn something from this, is there ever a way that I can conduct myself in normal life or other parts of my business life, that would actually get a better outcome? Maybe you can and maybe you can’t, and you won’t know until the next time it happens and I’m dealing with council, or the banks and I try to do something else.
In Bradley’s experience, accepting that you won’t be successful at everything and not compromising your integrity will in turn, actually help you attract good things.
It's interesting that we don't really pay much homage to it, that everyone needs to win. Well, no, everyone doesn't need to win. And using the same thing in a properly sense, it’s one of these things that you can't buy every single property, you can't get success all the time. Not everything you do is going to be successful 100% of the time. So maybe you need to accept that's not the case and deal with the consequence of that yourself, rather than trying to say, ‘How can I get a better success rate at auctions?’ Just let it go, let the flow go; if it was supposed to be, it was supposed to be. I've got my own rules about things that I think are important that I don't want to compromise. If I'm true to that then good things will come.
Starting his property journey in 1999 and with 15 years of experience in development, Bradley has implemented numerous strategies over time.
I've got my own definition of what is developing, which may or may not be the same as everybody else’s. Me developing a property is making money from real estate, without doing the physical work. I've touched on earlier about the renovation TV shows, or people who renovate a house or whatever and they make a bunch of money and it's all their own labour type stuff; that's not developing for me. It's [about] making money from property without doing physical work.
That physical work can be in a lot of cases buying a site, building four townhouses and selling them, it can be rezoning land, it can be buying a block of flats. There's a whole lot of things that you can do. That's not me doing the physical work. When I come to an office every day, I work on the businesses and manage and whatever else.
And you deal with council.
Absolutely. But I even outsource that, so my assistant will deal with accounts in the first instance. So if it needs to be at a high level, then I'll come and get involved at a high level. But I'm the one who'll deal with the banks, but I’ll let the builder deal with the trades, I’ll let the architect deal with the engineering. I will let everyone do their job; my role is to oversee the business that does that. So from a perspective of what it is, that's what it is I do, that’s what I see as property development. So when you say, ‘What do you do?’ I'm just trying to turn a buck out of property and I don't want to be the one who's painting a wall for that to be the case. I want to use my brain, I want to use how I read the tea leaves and what I see happening is my way to go and do that. And as for the scope of how I would do that, that changes constantly as the government changes in legislation or something else becomes flavour of the month. It sort of gives further opportunity to do that.
The flavour of this month is the construction and land subdivision.
Currently what I'm doing is two main things, right now I'm doing a lot of construction. Now, will that continue to happen? As long as the opportunity is there and I think I can do that and it’s the best use of my time and dollars, I will continue to do that. But it might be something I might change tack on that, you know, it might change tomorrow if I read the tea leaves a certain way that does that now - typically they take longer to do that just because of the time frame in the property. But if I see something tomorrow, I will go and do that. So I’ll give you an example. The suburb that you live in Tyrone, what's the median price of houses?
Between $900,000 to a million.
$900,000 to a million. So if you got a phone call today and someone said, ‘Tyrone, I've got a property here’ - and let’s assume that it meets all the criteria of being the median type of house, three bedrooms, two bathrooms, whatever the case - ‘You can buy it for $700,000 tomorrow because *insert whatever reason here*,’ would you buy it?
Yeah, for sure.
For sure, I would. Absolutely. There’s no question. Of course, there are a few reasons why you wouldn't because you didn’t have the $700,000 or didn’t have a backup system. So you’d bought it, now what's your plan with it? Just sell it off for $900,000. You might keep it for longer or whatever, it doesn't really matter. So that meets the criteria for me; property development, I'm making money without doing the physical work. I didn’t do anything to make it worth $900,000, it was worth $900,000. But I was able to pick it up for $700,000.
That would meet the criteria for me. Now look, there will be a point in time as there will be of points in history in the future, where that type of transaction will be able to be transacted for whatever reason. I would do that because it meets my definition of what I'm actually doing.
Right now I'm doing a lot of construction, where I'm trying to build something so it cost me $700,000 but it's worth $900,000, using that same example. So right now I'm doing a lot of construction of townhouses and I'm also doing some land subdivision, they’re the strategies I'm using right now. With the townhouses, I will either buy something with a permit or go get a permit and I'll go construct 3, 4, 5, 6, whatever number of townhouses, organise a builder, and go and sell them. I reckon it is pretty boring for people who've never done it before, but essentially what I'm trying to do is create a financial transaction. I'm trying to spend $4 million to receive $5 million, or whatever the number is through that. And the time frames are fairly quick in a sense. The other one’s land subdivision, where there are bigger parcels of land, I'm using pretty much exclusively other people's money to do it and the time frames are longer. You know, instead of being a one year, two-year process it might be a four year, five-year process.
It’s widely known among experts that property is generally a long term game. So talking of time frames, how long does it take to complete a project?
I've heard people say in the past, ‘I want a short term property project.’ Well there’s just some expectation behind timelines because if I buy a property tomorrow, I may have $700,000 cash to go tomorrow but I’ll be at the bank lined up, or at the vendors that are at the bank line up. Typically the settlement times are 60 to 90 days, so if I want to buy something and sell something in a really quick time frame, you can do simplifying settlements and all this stuff that could happen. But typically if you're 60 to 90 days on the way in and you're 60 to 90 days on the way out, well that's about six months.
If you want to do something in the middle like build something, or even if you want to renovate something, you can get access and all these other things. But it's not a week's exercise, it's a month's exercise and it might be a year's exercise, in doing some of these things. It takes time. So the notion of cash flow is usually misunderstood by people, which is honestly a problem because property by itself is a slow-moving beast. This is why I spoke earlier about when a bank makes a call on you they want to understand the notion of repaying the money within a short period of time, it just can't happen like that. You've got a fire sale and a fire sale generally doesn't result in a good outcome. As I say, you wake up every day wanting to be the hunter, not the hunted.
In order to be the hunter and succeed in property, Bradley says there are three components you need to have.
You need to have a good project to start with. If you buy a lemon of a project you can do whatever you want, it’ll still be a lemon of a project.
Then you need to have good funding and so you need to make sure about how you fund it. Right now bank funding, as I say, it's never been as cheap nor has it ever been as hard to get. Bank funding is pretty cheap compared to what it's been historical. So you need good funding; not only good funding at an interest rate but also good funding at an appropriate level. If you want to buy the property we just mentioned for $700,000, you want to make sure the banks can give you most of that - let's say 80%. Now if the bank charges their mind and gives you 60%, you wouldn't have what I would call ‘good funding’. You can have a poor project within reason, if you are adding value to it you will still be OK, because if you paid $800,000 for a $900,000 property you could still be OK if you got good funding with it and laid it capital free, using other people’s capital (that is, the banks) its sort of an advantageous outcome.
The third thing you need is cash reserves or cash flow to allow you to buy yourself time, in case one of the first two doesn't work out according to plan.
So how do you go about this?
One of the things I teach people who ask me about this is ‘how?’ Most people who can do one development will eventually learn how to do it and so forth. When you start doing multiple, the biggest thing that you need to understand is cash and cash flow and how the cash flows. I had a property settled yesterday, so the bank takes all the money because that's what the bank does and then releases the surplus, which is the easiest way to do it because it just is in a lot of cases. By the time they clear checks and transfer money and so forth, you might be looking at 3, 4, 5, 7 days later. So even though you said the settlement was on a certain day, you may not get paid on a certain day, you might even get paid the day after that. Which is OK, as long as you understand that's OK.
If I was expecting, yesterday the surplus was $600,000 which was what landed in my account or should land in my account. But it’s not going to land in there for another three days. Now incredibly frustrating on one hand, but it doesn’t matter, I know that at the end of the week there’ll be $600,000 there. That's nice, it's a nice end to the week.
Yeah definitely. I’d be very happy with that!
Except if you need that $600,000 in the middle the week, then it’s frustrating! It’s understanding the cash flow and the cash balances and making adequate allowance for all this in advance. And that's what I spend a lot of my time doing is I guess business planning and looking at the flow of things. So when I say I manage, it's what I do, I mean it’s not only people but I manage money and how it grows; inspiring the flow of money, that everyone gets paid. I'm a little duck here that's on the top. Everyone goes, ‘What do you actually do?’ But underneath, the legs are going like crazy.
For listeners who want to educate themselves on property developing Bradley advises that while you can learn a lot from courses, you can learn even more from firsthand experience.
There's a whole bunch of people that will have courses online and various things. The problem with the courses online, in my opinion, is that they will teach you the actual learning and the A to Z of how to develop the property or what have you, you can learn what the steps are so forth and that it's fine. But the actual learning of how you run this and how you get past this as a business or whatever else, you learn that by doing it.
So I'll be encouraging people to say you don't necessarily have to go stupid and just start firing off at the hip or whatever else. However, understand that if you do a course that tells you, I don't know, how to build a house, that's good for how to build a house while houses are built a certain way. The moment that things change - what I’ve spent a bit of time talking about - is that the only constant is change. That won't do much good if you're not actually used to dealing with how to change with it.
So I think you learn that by doing, or attempting to do that, then surround yourself with people who are also in a similar ilk of going on the same journey as what you are; whether that be people you see as mentors, or people that you see as equals and colleagues that you catch up with to do things together with.
If you want to connect with Bradley to undertake a development project with him, or just want to find out more about his market strategy and mindset, you can do so through his website or via email.
I should probably start by saying what I do is not appropriate for everyone and how I go about it may not be appropriate for everyone. So having said that I have a website, www.bradleypropertygroup.com.au and I’m [email protected] By all means, send an email. If you ask me in an email, ‘Can you tell me everything you know please in a return email,’ you know, you may not get that.
If you say, I don’t know, ‘Can we have a cup of coffee?’ I already drink too much coffee as it is. If you say, ‘Can we have lunch,’ I’m a businessman. So I'm trying to add value to a property and get paid for doing it. So pitch me your proposal - in the past, I've done things with mentoring people, I've been a project manager for people and that sort of stuff. So, by all means, get in contact. And even if you thought you just enjoyed this recording, you thought that it was pretty good, send me an email. If our paths happen to cross, then that’s terrific; if they don't I just want to wish everyone the best of luck in their developing journey and their investing journey, because that's what it is. Hopefully, it gives you the outcome that’s what you're aiming at.