Scale up your portfolio with just $50k

Jennings said that after building wealth through the traditional property pathway, he wanted to try his hand at development but was unsure how to begin.

“I wanted something more, and I thought, ‘How do we do that? We don’t have multiple millions of dollars, we don’t have the ability to borrow from the bank the amount we would need to do that’,” Jennings said.

After gathering a group of investors to fund a project, Jennings realised the system’s potential appeal to others looking to generate wealth.

He said that investors were becoming more inclined to consider alternative methods for building their portfolios, which could require less capital and be implemented more frequently.

“We’re seeing a lot more people who have built up $50,000, $100,000 in savings, and they don’t want to buy just yet because of the financial straitjacket it’s going to put them in,” Jennings said.

“You’re going into 30 years, with all of that stress and pressure, you’re barely making ends meet, and when are you actually going to get ahead?”

Using the investment model, clients could decide exactly which site their money was going towards, rather than being placed in a pool of funds.

“If the total development cost is $8 million and we’re borrowing $6 million, there is a $2 million gap that we need to cover, which is what they are contributing towards.”

With a project, if an investor funded 10 per cent of the “gap”, they would receive the same percentage of shares when the gains were realised.

He said the development model allowed investors to determine how much capital they were willing to invest, while offering the opportunity to realise gains more quickly, rather than waiting years for funds to become available for another investment.

“These aren’t buy-and-hold strategies, and that’s not why people come in; everyone wants to make short-term profits.”

The South Coast goldmine

When considering development opportunities, Jennings said it was important to assess the factors that determine a site's viability, such as land scarcity and demand.

He said that the abundance of land in his local Canberra market had made it an unattractive location for him to invest in for developments.

With the city constantly releasing new land and expanding its boundaries, Jennings said there was no appeal from a development standpoint.

“There is a greater risk of oversupply and underdemand, and there is more competition for what we do.”

Jennings said he had targeted developments on the South Coast because of the combination of available land and growing housing demand.

“You just constantly see a stream of cars and boats going through on long weekends and school holidays, and it was full of people.”

“The areas hadn’t properly been embraced yet.”

He said it made more sense to develop smaller projects and leave larger unit developments to “the big boys”.

“At the end of the day, there are challenges that come with that, and we‘re about bringing sites to everyday investors that aren’t going to cause them too much risk.”

Additionally, Jennings said that all investments carry risk, and it comes down to how they are managed.

“Time is the greatest enemy, and it’s always going to be there on the surface,” Jennings said.

“If you are going to be investing in property and you want to do property development, you have to be prepared to take on all of the challenges that come with it.”

“There are going to be good times in the market and harder times, but if you plan to cover and mitigate the risks, then you are ultimately going to be successful,” Jennings concluded.

Listen to the full episode here.

Tags:

• Property development
• Latest
• investor strategy

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