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How I Made My First Million Dollars.

• It’s much harder than anyone thinks.
• It’s all about taking several calculated risks.

 

Normally I would never think of writing about this topic. To the degree that I’m even hesitant to post this article.

However, a financial blogger I follow & respect, recently posted this question and invited written submissions. Being in a reflective mood, I willingly took up the challenge.

 

My first million took 12 years and five properties (personal developments) and an enormous amount of hard yet enjoyable work.

Achieving this arbitrary financial milestone was not a solo endeavour. My wife Maryanne was my co-pilot every step of the way.

Having $1.0m to our names was never a specific goal and honestly at the time we were not even conscious that we had achieved it.

For us buying properties and building/renovating them for our family to live in was what we loved doing. We always had a “can do” attitude and we just focused on “what’s next”.

Accumulating more equity in each property was just a desirable sideline to what we were doing.

Enjoying the designing, building process, buying, and selling real estate every 2 or 3 years became a big part of our family’s lifestyle and luckily our formula for financial security.

It was all about the journey (doing the work) and not the destination.

Each property had its own challenges, such as disputes with neighbours, heritage regulations, sky high interest rates (our second property mortgage peaked at 18% interest in 1992 to coincide with the birth of our first child), contaminated soil etc, etc.

During this 12-year period, both Maryanne and I had full time jobs and a couple of young children. Building and renovating homes was our side hustle, our hobby, our common passion.

 

Okay, I know you need specific details to legitimize my claims, so here are the key numbers and facts for our journey from $0.00 to $1.0M.

 

Property 1.

A long narrow 100 yr. old Victorian terrace house in Albert Park.

• Purchased 50/50 with my brother in 1986 for $110k. (Yes, that purchase figure is correct, hard to believe I know!)
• Full renovation took 2 years + $50k cash, doing most of the work ourselves, (whilst I was a full-time teacher).
• Sold in 1989 for $360k, my portion of net profit = $100k (tax free).

When I met Maryanne in 1987, she owned a house in St Kilda that she was renovating herself. The sale of her house contributed $70k to the purchase of property 2 below.

Property 2.

A double fronted Edwardian house in Albert Park, that had been split into two residences.

• Purchased in 1989 for $310k.
• Full renovation took 1 year + $70k cash. I did all the labouring work and Maryanne did all the painting.
• Sold in 1993 for $630k, our net profit = $250k (tax free).

 

Property 3.

3 small blocks of land in St Kilda subdivided from an old petrol station beside a railway line and construction of three new townhouses. What could go wrong!

• 3 blocks of land purchased in 1992 for $680k.
• Built 3 two storey townhouses costing a total of $450k.
• Sold one townhouse off the plan for $450k, one on completion for $610k and the third in 1996, after living in it for 3 years for $760k.
• Our total net profit from this development = $690k less tax $120k = $570k profit.

 

Property 4.

3 small blocks of land with plans and permits in Hawthorn subdivided from an old electricity company depot and the construction of three new townhouses.

• Land purchased in 1994 for $450k.
• Development of three new two storey townhouses cost $450k.
• One townhouse sold off the plans for $450k.
• Two townhouses sold on completion for $610k & $620k.
• Our total net profit from this development = $780k less tax $180k = $600k profit.

 

Property 5.

A joint venture development of three luxury townhouses with basement garages on a large corner block in Brighton.

• This was my first joint venture development, where the property owner contributed the land, and my building company did the design and construction.
• On completion we owned two of the town houses and my JV partner owned one.
• We paid my JV partner $550k for our portion of the land and spent $540k on developing two townhouses.
• We sold one townhouse off the plan for $860k and the other after living in it for 2 years for $1340k.
• Our net profit from this JV development = $1110k less tax $90k = $1020k profit.
• 1998 = The Milestone of $1.0m equity achieved.

 

Technically anyone could follow a similar property equity accumulation strategy. However, I feel that Maryanne and I have a unique combination of complementary skills and expertise.

Primarily, we are both “doers” who relish in hard work and complex tasks. Specifically, Maryanne had 20 years of experience in the fashion industry and was quick to turn her hand and tasteful eye to interior design.

With my first property renovation I had no qualified building skills or knowledge. However, once I was working full time in the building industry, I learnt rapidly and gained more and more skills and experience each year. After 3 or 4 property developments we were on a roll, and we never looked back.

Accumulating $1.0m of property equity in 12 years is doable for anyone that’s prepared to have a go, take some risks, work like crazy and back themselves.

 

"If you know something's going to work, it's not worth working on. It requires no courage. It requires no faith. It requires no skin in the game. The unknown is the foundry where you forge your chips. Everything important is uncertain. Sitting with the discomfort of that uncertainty is the hard part." Eliot Peper 

 

Successful property development is all about studying the real estate market and knowing what home buyers want. Then buying the right properties, building, and renovating economically and tastefully.

Having favourable economic conditions and making the most of the everchanging tax regulations also play a significant role.