The less obvious factors that can add huge value to your property’s potential
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.
1. 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.
2. 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.
3. 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.”
4. 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.
5. 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.
About the author
Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline. She has more than 20 years’ experience in property investing Australia-wide and has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in 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. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.