Category: Developing A Property

Yield or capital growth – which property investment strategy should you go for? (ANALYSIS)

If you’re just starting out in property investment and you’re not sure which investment strategy is right for you, it’s worth exploring the differences between yield and capital growth.

Understanding the differences can help you work out which strategy is right for you, and therefore the type of property you should be looking for. (more…)

Comments »
0 Comments

What’s the difference between a real estate agent and a buyer’s agent? (Q&A)

While most people know what a real estate agent – or seller’s agent – is, it seems not everyone knows what a buyer’s agent is – or does.

So we thought we’d break it down. (more…)

Comments »
0 Comments

Securing the right property – cosmetic appeal versus capital growth potential (TIPS)

Coat of paint

You know the old saying: “Don’t judge a book by its cover.” Many investors place too much emphasis on looking rich rather than becoming rich, and make the mistake of buying properties based on cosmetic appeal instead of their capital growth potential.

Buying a property just because it’s pretty could mean you end up with an under-performing investment.

Our go-to tips for weighing up aesthetic appeal versus potential capital growth include: (more…)

Comments »
0 Comments

What you need to know about property development (TOP TIPS)

construction-tools-with-blueprint-by-vichaya-kiatying-angsulee-resize

So you want to buy a property to develop or subdivide, but not sure where to start or what to look for?

Knowing how to secure a property with superior development potential can be difficult, especially if you are just starting out.

Here are our top tips for a successful development project: (more…)

Comments »
0 Comments

Building wealth by subdividing – benefits and pitfalls

home-plot-plan-by-supakitmod-resized

Any investment presents risks and rewards that must be properly understood before buying.

This is certainly the case when buying property for redevelopment. You can keep yourself occupied, but all your hard work could be for nothing if you’ve not done your homework.

“Less than 1 per cent of development-potential sites generate a profit”

You may be surprised to hear that small developments are by and large not profitable.

Less than 1 per cent of sites advertised as development-potential sites generate a profit for the new owners. In fact, the really good, profitable sites for a buy/develop/sell strategy generate just 15 per cent profit.

Don’t be greedy and hold out for the traditional 20 per cent yield properties as they are so few and far between you may miss out on few good deals by chasing a big one. (more…)

Comments »
0 Comments

How to profit from a small development

Investing in bricks and mortar continues to be a popular method of wealth creation in Perth, backed by historical evidence of long-term gains and the current lull in prices making property more affordable.

Many investors like to take their investment in real estate a few steps further… rather than just buying a new investment property, they aim to accelerate their progress by finding a property where value can be added through subdivision. However, while it’s smart to squeeze as much profit or cash flow as you can from a block of land, don’t fall into the trap of thinking the buy-develop-sell instantly strategy is a shortcut to big profits.

Many budding developers are shocked to hear that small developments are by and large not profitable. Not all areas and properties are created equal, and less than 1 per cent of sites advertised as development potential sites can generate a profit for the new owners.

A good retain and build duplex project can generate $80,000 to $100,000 in additional value, based on a project that satisfies the 15 per cent profit range. A triplex development might create between $100,000 and $115,000 of additional value. For developers who are expecting to ‘flip’ the properties and sell straight away, you can see how quickly that profit can be eroded through selling costs such as GST, Capital Gains impost and agents fees etc.

Aspiring small developers would do better to adopt a long-term portfolio building view with a development site, just as they would with a buy-and-hold rental property. Profits will more likely come from holding and renting the new dwellings; not only will you receive improved cash flow from rents, but you will also be able to benefit from depreciation and bask in the glow of capital gains without sacrificing your hard-earned development gains to expensive entry and exit costs. And down the track you can always sell off one here and there if you require cash to fund other projects or your lifestyle.

Good buy/develop/hold projects are in areas that will also attract good capital growth, and the additional properties created will add value to your balance sheet and bring in good income and at the same time offer valuable tax deductions through depreciation.

If this is your chosen strategy, it’s important to firstly know and understand your budget, and ensure you are comfortable with your commitments. Speak to a mortgage broker or bank and discuss how much you can borrow – keeping in mind the financing of the initial purchase price as well as the funds that will be required for the subdivision and development, whenever they are planned to occur.

You may have the intention and financial capacity to redevelop your new property now, or you may plan to max out your borrowings to buy the property and work with a savings plan to fund the development down the track.

Duplex site development costs can be on average between $35,000 and $60,000 for a basic subdivision of a single residential site into two blocks ready for building on, with services connected and extra required costs such as fencing and demolition might take the total up to $60,000 to $80,000. If you choose a profitable subdivision site you could make around $40,000 just by titling the blocks. However these developments are hard to find.

If you are retaining the home and you retitle the lots before building on them, then you can approach your finance provider for a refinance of the project. Banks are generally willing to lend more money for two titled blocks than for a single site.

All your hard work could be for nothing if you’ve not done your homework; it takes a lot of ‘on the ground’ time, research and networking to find the good sites. We recommend investors target properties with easy access to public transport, shops and other local amenities, and aim for properties closer to the city when possible.

It is important to look at investment properties that have the zoning currently for immediate redevelopment if that is it route you plan to take. If you intend to wait and take two or three years to raise the capital to redevelop, you could buy where the zonings are proposed to be changed.

Areas with proposed rezoning, such as Wanneroo or Forrestfield, are especially popular for investors looking to purchase a property with extra capital growth potential, as these properties typically enjoy comparatively lower prices to suburbs already zoned for development. Historically in Perth, demand for these properties increases rapidly as the proposed rezoning nears adoption, dragging up property values with it.

If you are able to purchase a property to buy and hold in one of these potential rezoning areas, you have the opportunity to either hold until your equity allows you to carry out the development yourself, or bank the land to sell to a developer when the market has lifted.

Good add value properties remain a very popular investment strategy, and investors who are willing to do their research almost have their pick of properties. However, accurately priced properties with add value opportunities continue to sell well, no matter the overall state of the market, and it is important for investors to carry out thorough due diligence and move quickly when they find the right property.

Property Wizards Logo and tagline If you have an interest in building your wealth through property, then call us on (08) 9381-7450, or request a FREE Starter Pack.

Comments »
0 Comments

Know your market before spending on renovations

Know your market before spending on renovationsThe home renovation craze is inspiring more and more West Australians to renovate for lifestyle and profit.  The Master Builder’s Associations’ Gavan Forster said while ABS figures reveal around $500 million is spent on renovations in the State each year, the actual figure is closer to $2 billion. Kitchen and bathrooms top the list, followed by adding a second storey or another bedroom.

The team at Property Wizards believe you can’t beat buying to add value, whether through renovation, development or subdivision, as long as it’s the right property in the right location.

If done wisely, increasing the value of your investment through home renovation can boost your cash flow and improve your chances of attracting and keeping good tenants.

However, not all renovations are equal and there are some common pitfalls to avoid when deciding how to best add value.

Renovation traps to avoid

Overcapitalising is a key risk to consider.  We believe it’s important to know the market when looking to add value to an investment property.  Seek advice and find out what has sold in your area.

Understanding the market will also ensure you don’t limit your resale potential by spending money on features that buyers don’t want.  For example, a below-ground pool or a fancy garden may improve the look of the house, but you may not get your money back.

A recent survey by the Commonwealth Bank revealed West Australians are the keenest renovators in the nation, although they are also the most likely to go over budget and over deadline.  As a result, 56% of respondents were forced to make compromises, such as simplifying their designs or skimping on the quality of materials.

Hidden versus visible improvements

It is often good to add value in a visible way, particularly where the repairs are cosmetic and low cost, for example replacing grotty kitchen bench tops or a rusty letterbox.  Hidden improvements however, like rewiring or plumbing, are often expensive and don’t add much value.

A good way to get ‘the most bang for your buck’ is to look for ugly or shabby features that can be easily fixed.  These may include replacing or updating old floor coverings, window furnishings, light fittings, cupboard handles and tap ware.  Painting in light, neutral colours is another way to add cost-effective value.

Consider providing more storage options, improving the street appeal and front entrance or installing a shade sail or a deck in the backyard.

If you decide on a major renovation, we recommend you ensure your property is structurally sound and engage professionals to do the job so it doesn’t end up costing you in unforeseen expenses.  A professional design concept is also essential and you may be required to get Council approval.

With good advice, research and careful planning, the right home renovation can increase your equity and put more money in your pocket.

Property Wizards Logo and tagline If you have an interest in building your wealth through property, then call us on (08) 9381-7450, or request a FREE Starter Pack.

Comments »
0 Comments

Do you see a dump or dollar signs? The 5 cosmetic appeal rules to invest in property by

This simple makeover added thousands of dollars more to the value of the property than it cost to renovate.

Many investors place too much emphasis on looking rich rather than becoming rich. They can mistake a good looking property for a good investment, buying based on looks instead of growth potential.

Successful property investors, with multiple properties that grow in value, are not flashy, appearance-conscious people. They look to the bottom line make purchase decisions based on facts rather than feelings.

Buying the right property in the right location is the way to go to grow your wealth, regardless of street appeal.

If you buy a property just because it’s pretty, it could mean you end up with an under-performing investment.

Remember, an ugly duckling property in the right street can be a better prospect to make you wealthy than an attractive property on the wrong street.

Some key factors to consider when weighing up aesthetic appeal versus potential growth include:

  • Growth should be your number one priority at all times. Just because a property looks impressive or is well maintained does not automatically mean it will perform well in the growth stakes.  It is always better to select a property with superior growth potential than one that simply “looks nice.”
  • Be a visionary. Less attractive properties are often overlooked because most people can’t see their potential. This is where clever investors can make money by picking up properties which have great growth prospects, but with a lower price tag. Remember, you can come out on top by spending a little to prettify your “ugly duckling” investment. Those savings will usually more than cover cosmetic improvements that can turn your property into a lucrative swan.
  • You don’t have to get your hands dirty. Many buyers say they don’t want, or don’t have the time, to repaint or recarpet their new investment – but you don’t have to do it yourself! When considering buying one of these properties, simply factor in the cost of hiring someone to do the work. Hire qualified professionals to take care of this for you.
  • Cosmetic improvements may help boost your rental return. Snapping up the right property in the right location, and then beautifying it can increase your rental return above that of more expensive, already-attractive properties.
  • And don’t forget – you can improve the look of a property, but you can’t convert a low-growth property to high-growth one with just a lick of paint. This means staying focused on securing properties with key growth drivers, such as proximity to the city, lifestyle attractions or the ocean.

 

Property Wizards Logo and tagline If you have an interest in building your wealth through property, then call us on (08) 9381-7450, or request a FREE Starter Pack.

Comments »
0 Comments

FREE Starter Pack

free-starter-pack

With everything you need to get started in property investment, development or home buying. Click here

FREE Perth Property Market Report

FREE Perth Property Market Report

With latest suburb information, growth rates and essential information for property investors and home buyers. Click here

FREE Property Briefings

FREE Property Briefings

Information sessions on the property market, latest strategies, investment and development. Cutting edge information, no sales. Click here

Subscribe

Subscribe

For the latest Hot Properties, Tips, Strategies, Property Market Info. Click here


Awards and Recognitions