061 – The Secrets of Buying Property with Adam Jones

Download workbook 061 – The secret to buying property with Adam Jones.

We’ve been discussing property as part of your overall business strategy. In this episode of BLL we welcome Adam Jones onto the show. Adam is the founder with Black Bear Investment Group, a property developer based in Brisbane. Adam is a former lawyer who has worked for many years managing and developing properties around Australia. We’ve worked with Adam and the rest of the team at Black Bear for many years and are excited to have him on the show.

Adam worked for several years as a lawyer but quickly found himself drawn to the property investment.

“It took less time, I made more money and I was having more fun.” He says.

Adam was fortunate to have entered the industry just as interest rates came down to nearly 0% in 2008-9. Holding property became much more affordable. His strategy at the time was building properties to hold for the long term. His first property was a splitter. He had learned enough to understand how profitable subdividing property could be. He made about $150 thousand on that property – which convinced him that this property game was pretty easy.

Adam sometimes feels like he wasted his five years at university. But he does recognize that law school provided him with some important skills. Knowing your way around a contract is hugely important in the property development industry. And the connections he was able to make as a law student and young lawyer proved invaluable once he shifted his focus to business. Most of what he has learned over the last decade has come from simply doing it. Because every project is so different it’s only by doing it that you can learn.

There’s a range of things Adam wants to see before he enters into a new project. He needs to have the right legal advice in place as well as the right accountants. The costs involved have to be well understood and he says he needs to fully understand what his current capacity is. The terms available from lenders is constantly shifting. What was true six months ago may no longer be the case. There’s no point in making bids on properties unless he fully understands all those numbers.

There are plenty of pitfalls when starting a new property development. Lenders suddenly changing the terms of a loan can impact more than just single project. Unexpectedly having to pay hundreds of thousands of dollars could have a catastrophic impact on his entire business. But getting electricians, plumbers and carpenters to complete projects in a timely manner can also be very tricky. It could take as much as six months to get a phone line installed. Careful planning is critical to making sure projects are completed on time.

Adam has been a pioneer in the use of syndicates to finance new projects. He started using this structure after realizing that his company had the capacity to develop more projects but lacked the funding.

“The cash requirements for a lot of new projects can be pretty intense.” He says.

A syndicate allows Black Bear to develop those new projects that wouldn’t be possible if they were only using their money. The syndicate is structured so that Black Bear develops the project, gets all the approvals needed and carries to completion. For the investors it’s largely a passive role but Adam makes sure to keep them updates throughout the process. They have developed eight projects using this structure.

Adam says that the best advice he has ever heard comes from the stock market wizard Warren Buffet.

“Be greedy when others and fearful.” Buffet said. “And be fearful when others are greedy.

Buffet was referring to the stock market but Adam thinks that lesson is very much applicable to the real estate world.

Adam’s advice for people thinking about investing in property is simple.

“Don’t take advice from me.” He says.

You have to find the right people to help develop a strategy that works for you. Everyone has a different tolerance for risk. Developing a good strategy with competent lawyers, accountants and real estate professionals is the key to success. If you’re not an expert find someone who is.