How to recognise potential in a property
Those in the know will tell you in relation to property ‘you make your money when you buy’. So what should you be looking for when making your selection? Get insights into the less obvious factors that can add huge value to your property’s potential here.
You’re on the hunt looking for an investment property. You’ve set your budget, done all your research on recent sale prices and rental prices in your areas of interest, and you have your strategy mapped out. You may have even narrowed down the style of property to a house, duplex, townhouse or unit.
So, with the fundamentals out of the way, how do you go about finding the property with the highest potential to add value? Whether you’re buying an investment property or your own home, Debra Beck-Mewing (Editor in chief of Property Portfolio) has these five top tips for recognising potential capital value. And it’s likely they are not what you were expecting.
- One of the best ways to add value is through changes to the property which means the local planning rules should be your first point of call when assessing your potential purchase. The planning rules will tell you what you can do, and more importantly, any restrictions. Don’t assume that you can’t extend or redesign apartments – some strata by-laws will allow some building work to bring units up to standard so read the contract and strata reports carefully to see what’s possible.
- Look at the surrounding properties and particularly their size. What is being built currently in the area? This will help you to see what types of construction or renovations the local council has approved in the past, and also understand what may be built next to you that may affect your property.
- While total square metres is important for your rental yield, the size and shape of the property is just as important, and particularly the street frontage width. Debra notes “A rectangular shape is by far the best and gives you the best scope to optimise the property. If the property is an irregular shape it can be hard to find a workable floor plan. A property that gets narrow towards the back can still work well, so long as it is broad at the front.”
- The slope of the property is also an important factor, and not just for the obvious advantages of sunlight or views. A house that slopes towards the street is generally going to give you better access to sewers and rainwater drains, which councils tend to locate under the street. Future development of your property may require access to underground pipework, which can be difficult to detect. Note some can be located towards the back of buildings, so it’s worth checking out via the diagrams in the contract, or on council websites.
- Look at the existing property layout and design and establish how you could optimise the floorplan. An extension built onto the back of a house can easily add instant value by adding an extra bedroom or fixing a problematic layout. Look also at the roof if you’re considering building up. A pitched roof can pave the way for an easy attic conversion.
Using these tips to find a property can significantly improve its potential to create capital (and rental) value in the future. Even if you don’t have the budget to develop your property now, considering these factors before you buy will ensure you open up plenty of options to develop the property in the future. Having a property that has scope to develop beyond just a cosmetic refresh will add significant value to you if you choose to renovate, but also to a future buyer if you decide to sell it.
Buy smarter = limitless ways to build lifetime income
Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property. A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income.
Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.