22 August 2019

How to find an investment twist

In my opinion, whoever said you can’t have your cake and eat it too wasn’t talking about investment opportunities during the bottom of a property market’s price cycle.

After almost two years of declines, real estate values in Australia’s two biggest capital cities – Sydney and Melbourne – are stabilising, and a period of recovery looks to be just on the horizon.

With a combination of discounted prices, keen vendors and limited buyer numbers, there are plenty of attractive investments around that are full of potential.

Best of all, many include a twist – a special element that can be called upon to help add equity straight away or in the near future.

But finding property with these value-boosting twists takes a bit of extra effort. Here’s some of the facts we considered when seeking these special holdings.

Land ho!

There’s a wise saying in property circles – “Buy land… they’re not making any more of it.”

When the market is bottoming out, it’s a great time to look around for discounted properties that include a decent piece of earth.

Not only do you get a valuable chunk of dirt at a reduced price, and quite possibly below its intrinsic value due to discounting and eager vendors, but choose the right plot and you have potential to make equity by doing very little.

For one, you could potentially knock down the existing dwelling and subdivide into two smaller plots if the local planning framework allows it. An old place that’s worth getting rid of could make way for two new slices of land, with a tidy profit attached.

Secondly, you might be able to demolish and build a duplex or small group of villas or townhouses. Or you could buy, get plans approved through council for a new build and on sell the project at a tidy gain without having to turn an ounce of soil.

Of course, you need to know where to look and what to look for. Spotting re-development potential requires a working knowledge of local town planning guidelines at the very least. You must be expert in determining market value too of course.

This is where an experienced, connected and independent buyers’ agent will be able to guide you towards properties with the best potential.

Diamond in the rough

Another path to added equity is through properties in need of TLC.

They’re often harder to sell in soft markets, and vendors are more willing to discount these holdings to get them off their books.

Once you’ve locked down an investment, there are excellent value-building opportunities through either cosmetic or structural renovation. In addition, you might choose to do minor work that brings it to a rentable standard. You can then retain the home and collect an income until market conditions improve. The added bonus is these properties often achieve a reasonably attractive rental yield based on their buy-in price.

Homes that need some attention in well-positioned suburbs with strong future demand from buyers and good current demand from renters are worth seeking out. A buyers’ agent can identify areas that are on the cusp of good things and then find the properties within them that offer the best potential to add value.

Look at local councils

There’s a wealth of interesting insight to be discovered within the myriad of local councils that make up our major cities.

Each has its own planning policies and future growth strategies that can help you identify the hotspots for market gains.

For example, some councils are embracing the idea of multi-dwelling lots that aren’t quite unit or townhouse developments but offer the chance to add a new, auxiliary dwelling. Think granny flats in backyards or ‘laneway developments’ where rear access offers the chance to throw up a compact but well-designed dwelling.

As cities grow and land becomes scarce, councils promoting ways to yield more dwelling units across limited available space.

Minimum land size requirements are being eased, townhouses and duplexes are being embraced and things like granny flats are becoming the norm. Planning committee meetings, draft zoning documents and discussion papers are worth perusing to get a sense of where the best future opportunities might lie.

In addition, government loves to announce major infrastructure and/or planned employment hubs. Let these projects help fuel identify location set to enjoy future value gains.

Of course, if you don’t have time to get into the nitty gritty with every single council, a buyers’ agent can be your ear to the ground. They are intimately familiar with what’s happening and can help you seek the hidden gold that others miss.

When it comes to buying property, don’t dismiss the chance to secure excellent options that can help boost your portfolio’s net value through savvy, value-adding approaches. Locking in the right holding during a slow market, will see you come out a winner as prices inevitably move into a rising cycle once more.

REINSW thanks Rich Harvey, CEO of Propertybuyer for this article.

Want more?
  • Want to keep up-to-date with industry news? Become a member today
  • If you're a member and have any questions call the REINSW Helpline on 9264 2343.
  • Keep learning with REINSW TrainingReal Estate Licensing Course. In-class - Day/Evening, Online, Recognition of Prior Learning.
 

Related articles