Small Projects Quicken Wealth Creation Process

Posted on 25/11/2017  
Small Projects Quicken Wealth Creation Process

Traditional real estate investment methods no longer satisfy many property investors, who are seeking ways to accelerate the wealth creation process.

Passive investment – buying a tenanted property and waiting for capital growth, often while claiming negative gearing benefits – no longer works for growing numbers of Australians.

“People are looking for something better,” says Trent Giumelli, chairman of Giumelli Group. “They want to be more proactive or aggressive.”

Giumelli - who has worked on developments worth $293 million and has built a personal property portfolio worth $48 million in less than five years – mentors investors who want to become developers.

“Forget about investing in property, we manufacture it,” he says. “We’re not reliant on market conditions for growth – we manufacture our own.”

Giumelli claims that negative gearing is a dead strategy and that buy-and-hold no longer works for investors.

He asks: “Would you buy a business that’s losing money or back a horse that continually loses? So why do it in property?

“Traditionally the rule of thumb is that negatively-geared property typically grows at a higher rate and the government has amazing tax incentives for us to lose money – which I and many of my peers consider to be an inefficient tax on society.

“Unless you’re on a massive income the tax advantages don’t really work.

“What happens if you lose your job or go without employment for three months or more? Do you have the required cash-flow to sustain your negative investments? If the answer is no, you will have to liquidate properties just to stay afloat.

“How do I know this? It’s exactly what happened to me. I had to halve my portfolio in four months.”

Giumelli says that for investors who buy a new house-and-land package, others are making money off their purchase. In a typical $500,000 property, he estimates $180,000 is paid in taxes, mortgage insurance, commissions, fees and the developer’s profit.

His alternative is what he calls his Small Property Projects Formula. He says investors using this process can multiply their wealth creation results by a factor of between three and 10.

“There’s nothing magical about this – and it certainly isn’t luck,” he says. “The system is safe, secure and doesn’t require any previous experience. Plus, it can be done in less than four hours per week.”

Giumelli provides the following case studies of typical projects and their outcomes:

  • Sub-division of a 1078m2 home site into two house lots; purchase price $420,000; cash in $163,000; net profit $262,000; return on cash 152%; time-line nine months.
  • Sub-division of a 2412m2 site to create four house lots; purchase price $480,000; cash in $330,000; net profit $507,000; return on cash 154%; time line seven months.
  • Sub-division of a 2033m2 site to create five house lots; purchase price $430,000; cash in $350,000; net profit $450,000; return on cash 129%; time line 12 months.
  • Sub-division of 12,500m2 site to create 10 house lots; purchase price $583,000; cash in $600,000; net profit $1.2 million; return on cash 200%; time-line 15 months.

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