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Earn As You Learn: How to Have Your Cake and Eat it Too
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One of the biggest mistakes you can make as a newbie Property Developer is to rush things. I understand how it happens - all of a sudden you realise you've discovered the ‘Holy Grail’ of financial freedom, and the desire to jump straight in, boots and all, and become a millionaire in five minutes, is hard to resist…
But there's a very good reason that the first thing we do in my Property Development Formula course is a 5-year Property Action Plan. You could jump ahead to the cakey bits by buying a cake at the bakery, but learning to bake the cake yourself means you can have cake even when the shops are shut.
Right now, you're probably scratching your head and wondering if I'm mixing my metaphors and the cake is going to be fish-flavoured! The thing is, baking a delicious cake takes time. You need to buy the right ingredients and learn the necessary skills. And in today's world a lot of us are short on time and money, so potentially waiting a couple of years before we get the recipe right isn't appealing.
The good news is there is a way to get paid while you're learning to become a ‘Master Baker’...
But there's a very good reason that the first thing we do in my Property Development Formula course is a 5-year Property Action Plan. You could jump ahead to the cakey bits by buying a cake at the bakery, but learning to bake the cake yourself means you can have cake even when the shops are shut.
Right now, you're probably scratching your head and wondering if I'm mixing my metaphors and the cake is going to be fish-flavoured! The thing is, baking a delicious cake takes time. You need to buy the right ingredients and learn the necessary skills. And in today's world a lot of us are short on time and money, so potentially waiting a couple of years before we get the recipe right isn't appealing.
The good news is there is a way to get paid while you're learning to become a ‘Master Baker’...
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Deal Finding
One of the best aspects of becoming a Property Developer is that you don't need to take a project to completion in order to benefit financially from it. If you're active in the market, chances are more deals will come your way than you'll be able to participate in. So it makes sense to pass those on to other people.
You might choose to do that out of the goodness of your heart, but it's also true that if you've found a cracker of a deal, another Property Developer who is busy and in a position to do a deal will be more than happy to give you some money in return.
One of the best aspects of becoming a Property Developer is that you don't need to take a project to completion in order to benefit financially from it. If you're active in the market, chances are more deals will come your way than you'll be able to participate in. So it makes sense to pass those on to other people.
You might choose to do that out of the goodness of your heart, but it's also true that if you've found a cracker of a deal, another Property Developer who is busy and in a position to do a deal will be more than happy to give you some money in return.
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Understanding that, you can use deal finding as a way to earn as you learn. As you learn the skills required to be a Property Developer, start applying them in your market. If your research tells you that a certain suburb has potential, then start farming that suburb for deals.
Then, when a deal comes up, pass it on for a fee. Two things will happen at that point:
If people are snapping up the deals you're finding, big gold star! That means you're on track. You can feel confident that you're building up the right skills and doing a great job of identifying profitable deals. Essentially, you're getting experience without any risk. All of which means that when you've built up enough knowledge to take the plunge into a deal yourself, you know you can trust the process and as a result choose a deal that's both developable and profitable.
If nobody takes the deal, that's a wonderful learning opportunity for you. Ask them why they turned it down. Now, it may just be that their resources are tied up in other deals so the timing is bad. But if they're giving you feedback about gaps in the feasibility, or other issues about the information you've supplied, then you can use that feedback to improve your process.
Then, when a deal comes up, pass it on for a fee. Two things will happen at that point:
- Someone will snap it up, hand you some money and ask if you have any more
- Everyone you ask will say no
If people are snapping up the deals you're finding, big gold star! That means you're on track. You can feel confident that you're building up the right skills and doing a great job of identifying profitable deals. Essentially, you're getting experience without any risk. All of which means that when you've built up enough knowledge to take the plunge into a deal yourself, you know you can trust the process and as a result choose a deal that's both developable and profitable.
If nobody takes the deal, that's a wonderful learning opportunity for you. Ask them why they turned it down. Now, it may just be that their resources are tied up in other deals so the timing is bad. But if they're giving you feedback about gaps in the feasibility, or other issues about the information you've supplied, then you can use that feedback to improve your process.
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Do I Need a Licence?
Ahhh, that's the million-dollar question that I always get asked when I mention deal-finding....
I strongly advise that you do some research to see what your state's requirements in this area might be, and then have a chat with a property lawyer.
If a couple of times you send someone the URL for a listing you've seen that you think is a profitable deal, then they buy you a beer at the next meetup as a thank you, it's probably not an issue. In fact, it probably doesn’t even qualify as deal finding - you just did a favour for a friend.
Ahhh, that's the million-dollar question that I always get asked when I mention deal-finding....
I strongly advise that you do some research to see what your state's requirements in this area might be, and then have a chat with a property lawyer.
If a couple of times you send someone the URL for a listing you've seen that you think is a profitable deal, then they buy you a beer at the next meetup as a thank you, it's probably not an issue. In fact, it probably doesn’t even qualify as deal finding - you just did a favour for a friend.
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Once you move into the realm of getting paid for finding the deal though, particularly if you're doing a substantial amount of preparation before passing it on or if you’ve already secured the deal in some way - that's when I strongly suggest you heed the comments above about having a chat with a lawyer. You need to determine for yourself whether or not you need any sort of licence or qualification to do that in your state.
What Should I Charge?
And that's the second million-dollar question I get asked!
And you're going to hate this, but here's my answer: you charge whatever you negotiate with the person you flip the deal to.
I can certainly say there are 2 standard methods for determining a fee - a flat amount, or a percentage of the property's purchase price. But what amount or how big a percentage - that's up to the two of you.
There are some factors that will help determine the size of your fee:
So if you've spotted a deal online and done a rough feasibility and it has promise you'd probably be on the lower end. If you've identified the deal, done due diligence including a detailed feasibility, and have secured the deal in some way, you're up the higher end - and potentially in the realm of needing some form of licence. The main point though is to get your agreement in writing.
Now that you know you can use deal-finding as a way to earn some income whilst learning the Property Developer skills you need, it's time to get in your kitchen and get cracking (okay, bad yolk! groan) on making great cakes. And after all this talk of cakes and fish, it’s no wonder I’m a Property Developer!
What Should I Charge?
And that's the second million-dollar question I get asked!
And you're going to hate this, but here's my answer: you charge whatever you negotiate with the person you flip the deal to.
I can certainly say there are 2 standard methods for determining a fee - a flat amount, or a percentage of the property's purchase price. But what amount or how big a percentage - that's up to the two of you.
There are some factors that will help determine the size of your fee:
- Amount of preparatory work you've done
- Level of information you've provided
- Whether or not you've already secured the deal
- Size of the deal
- Profitability of the deal
So if you've spotted a deal online and done a rough feasibility and it has promise you'd probably be on the lower end. If you've identified the deal, done due diligence including a detailed feasibility, and have secured the deal in some way, you're up the higher end - and potentially in the realm of needing some form of licence. The main point though is to get your agreement in writing.
Now that you know you can use deal-finding as a way to earn some income whilst learning the Property Developer skills you need, it's time to get in your kitchen and get cracking (okay, bad yolk! groan) on making great cakes. And after all this talk of cakes and fish, it’s no wonder I’m a Property Developer!
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