Ian Ugarte (speaker) emphasizes ethics in property development and education, urging practitioners to prioritise community benefit over profit ("it needs to make sense before it makes dollars"). He recounts two concrete anecdotes: (1) a deal mentioned on stage that was later bought by someone in a crowd of about 307 people, and (2) a $400,000 contracted purchase where the sellers' mortgage was $475,000; Ugarte declined the deal on ethical grounds to avoid leaving the sellers worse off. The talk mixes personal confession, lessons on negotiation ethics, and practical care for vulnerable sellers.
Questions this video answers
October 19, 2018.
About 307 people.
$400,000.
$475,000.
Chapters
Ethics in this business is a very important thing. Now, firstly, I'll say two things that I've done in my life. Firstly, I've become a property developer. And secondly, I teach people about property. So effectively, the general community that doesn't know who I am out there and sees a Facebook post of some sort thinks that I'm a developer that has no ethics. And secondly, that I'm a property spruce. Now, I'm neither one of those. I have a really high ethic and moral and integrity basis to everything I do. I make sure that the community benefits first before I could benefit from a monetary stance. We have a catchphrase in our business that says it needs to make sense before it makes dollars. That is, it needs to benefit the community first before it makes us money. Now, it does have to make us money. It has to tick both boxes. But essentially, if it doesn't tick both, we won't do a project. And I ask you with all my heart that in everything that you do, make sure you're ethical. I've seen the possibility of other people stealing deals from Facebook pages, someone who's put up a deal and says, I'm looking at this property, and the next thing we know, it's gone. Many years ago, I feel very. I feel very. I still have a very strong and sorrow heart around the fact that I was talking about a deal on stage and I mentioned a particular industry that this. This deal had that the student was actually looking at. And unfortunately, in a crowd of about 307people, decided that they would take the easy option and ring up and they googled that, that particular industry, which was a rare industry, they found this property and. And then one of them bought it and it stole the deal from the student that I was working with. And again, I feel really bad about that and it still haunts me to this day. Now, the student understood when I explained to them how sorry I was, and I'm very thankful that that student knows who I am and that the words that came out my mouth damaged that position for them. But they also know that you know in the whole.
Energy of what was going on there that it turned out. I ask you to be ethical in everything that you do in property, around the negotiation, around the people that you're dealing with, and make sure you don't get yourself into a situation where when it comes to the balance and the way up of your choices, that you don't feel right about something and that your intuition, your stomach feeling isn't right. We've had deals in the past where we've been in a position where we had this deal and it was actually a two story property. It had a granny flat down in the corner here and it had a four bedroom house. Now this couple, beautiful couple, were putting, put themselves in a position where bankruptcy was coming up. She had a terminal illness and he had broken his hip. Now I didn't know a lot of this deal, but I did know that they were sick. So I had a sit down with them and I essentially said to them, look, I want you to make, I want to make sure that you understand that we're here and I want to make sure that this helps you as well as helping me out as well.
I sat down with them and essentially we had contracted and we made a deal at $400,000. And the $400,000 deal actually had a longer term settlement. We were going to make sure that they were looked after, that their costs were paid for and that they wouldn't go into a bankruptcy situation.
Once we did agree on the deal, I then said, well, okay, well now we need to talk to your bank, so can we have a look at your bank details? We signed a non disclosure around making sure we didn't tell anyone any details about their situation in the bank detail component of it. And they're okay for me to tell this story because fortunately she did survive and she's still around. Now in this deal, their mortgage was actually $475,000.
So effectively what would have happened is we would have bought this property for $400,000 and they would have ended up with a personal loan at $475,000. Now most people that had very low morals integrity would have gone ahead with that deal because there was a good $100,000 to be made in the deal. Except a couple, an older couple was going to end up in a position that wasn't right for them. They would have had to dig into their super fund. They would have not been in a good position overall for the rest of their life. And so essentially what I did was I said to them, I'm sorry, I can't do this deal. The reason I can't do this deal is that you're going to be in a worse situation than when you first met me. And from an ethical perspective, I'm not happy or comfortable to do that. So what I said to them was, let's not worry about these two figures here. You're currently in a position that you're not well and you do have a four bedroom house that you're living in and you have a granny flat that's empty. Now, it doesn't take a lot of thought and process to say how can we fix their problem? So the first thing I said to them was, you've got a broken hip and you're not very well and you're actually having to look after a four bedroom house. So what I'd like for you to do is if you can move down into the granny flat which is comfortable, it's not the biggest size house that you've ever lived in. But right now you need to concentrate on your health and he needs to stop climbing up and down stairs because he had a broken hip. Now, it would have been good for rehab, but unfortunately, right then and there, it was difficult for him to get around. And then what they did was they went and rented the property here.
And we helped them contact their bank and said to their bank, currently right now we're both quite ill and we would like to be able to stall the payments and give us a breather. For six months they were playing principal and interest. So they basically gave them six months of non payment of their loan and then they went to interest only. Now, by doing these two things, they got themselves into a much better situation. They were managed to save some money so that they had some buffer. Now with that release of pressure of the bankruptcy away from them, she could then concentrate on her health. He could concentrate on making sure that his broken hip was going to get better too. And in that situation, I walked away from a deal that could have made us $100,000, but I walked away with a feeling that I didn't rip someone off ethically. You have to choose the right thing moving forward. And if we've got any chance of changing the community perspective of how they look at property investors and developers in this country, you have to do it from this place. Now, I know that there's a lot of people out there that really couldn't care and all they are is chasing money. I know that if you're sitting there right now and you're watching this message, you've got to understand that everything we do, with all my heart and all my emotion, I want to make sure you're the right person to be in this tribe and in this community. We look after people and we look after each other. Now, as emotional as it is for me to bring up stories like this, I want you to also know that I'm here to support you and the community is here to support you as well. We've got some amazing team members, we've got some amazing students, and we've got amazing connections all over the country that absolutely understand that Smally's a new big. The Fundamentals program and specifically the High Res program with the 1 million self contained homes that we're going to produce over the next 10 years is going to make a big difference to the landscape of property investing. The property investing is going to go from taking a property from a commodity to actually providing homes for people again. Homes that people like to live in and homes that people want to live in. So that's my message. Please be ethical with everything you do. Whether it be dealing with a real estate agent, whether you're buying, negotiating, selling, whether it's. Whether you're dealing with tradespeople or people that you're buying from directly. Make sure that at the end of the day, when the scales get weighed up of good and bad, that you've done as much good as you possibly can to help someone else out. Because ultimately when you help yourself out, other people get helped out as well and the karma will return back to you. It's my message.
