“I made $1.2 million”
So went partially the conversation with my colleague at work today – a big hulking Eastern European straight out of the KGB Academy for big hulking Eastern Europeans.
Of course, anyone who tells you they made $1.2 million deserves some attention, in fact I would have paid attention to whatever he was saying.
4 years ago he tells me, he purchased a property to live in with his newly married wife. At the start of the Sydney boom, he decided to knock down the run down dwelling and develop a 5 bedroom mansion on the same block. The sale went through last week and as a result he now has “one point two million in the bank”.
He then sauntered away to “persuade” some lazy pen pusher in the back office and I was left to ponder what he just told me.
WOW I thought, 4 years for $1.2m is … $400k a year!
Then I realized that if I had 12 apples and gave 3 of my friends 4 apples then we would all have 16 apples. Something didn’t seem quite right with that.
By the time he came back I was onto my 2nd apple – a Red Delicious, which was red and delicious – and asked him to continue with his story.
“Well 4 years ago, I purchased a property to live in with my newly married…” (I thought about interrupting him but didn’t want to end up a Russian journalist so let him repeat himself).
When he got to the end a 2nd time, I decided to risk it and ask Mr Putin some questions, the numbers at first and then if he liked where it was heading, how he did it.
“I purchased the property from my aunt for $560,000 in 2013 and it cost me around $540/550,000 to develop it. Sold under auction for just over $2.3m, no tax paid as its a primary residence, $1.2mil in the bank”.
“Hm OK, how big was the block?”
“Just over 640”.
“Decent size, so… um who helped you to build it?”
“My Dad’s been a builder for 42 years so basically asked him and his mates to help with the build, took about 3 years”.
(AHA! I thought, should I eat a 3rd Red Delicious?)
“Nice, nice – so he would also source materials much cheaper as well?”
“Of course, otherwise what’s the point?”
“So… what did you do in this process?”
“A lot, basically what the old man told me to do, learnt a lot, swore a lot, made a lot – any other questions?”
“N… no…th…thank you… sir”.
Although lucky to be alive, the follow-up questions were worth it. At face value the first time round it looked like such a cinch. Buy a house, knock it down, build a new house, sell the new house, walk away with alotta Benjamins.
YET you have to dig deeper and therein lies the truth. He gave me so much gold in our short conversation. Let’s see.
- He purchased the property from his aunt (presumably under market value).
- It was a good size block with future upside potential.
- His Dad was a builder for 42 freaking years – hell if I was doing something for 42 years I would hope I am semi-decent at it, otherwise just quit yknow before 42 years instead.
- The build took a good 36 months from beginning to end – 36 months! Imagine building IKEA furniture for THIRTY SIX MONTHS, FUCK. MY. LIFE.
- He sourced materials at wholesale prices which magnified the end gains – only chumps pay retail.
- He listened to an older, wiser and more experienced person to provide direction and guidance.
- He was able to build this under
- No tax paid on capital gains as its primary residence.
- Above all, the market boomed whilst he was developing so get your timing right – easier said than done and the hardest of them all.
Net result? GET MONEY UH GET MONEY UH HUH
I was mighty chuffed that I took away so many lessons from 2 apples and a 3 minute conversation mainly a) an apple a day keeps the doctor away and b) sometimes its useful to really dive further into a conversation instead of taking everything at face value.
Next time someone tells you a story, delve a bit deeper – you may learn something from just asking further questions.
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