How To Profit From Property By Adding Value and Property Development

Posted on Monday, December 3 2012

Can Adding Value and Property Development Make You Money ?

How To Profit From Property Part 1.

Getting involved in Propety Development and becoming a Propety Developer does not necessarily mean building houses or high-rises and selling them for a profit, there are many Property Investors who develop their properties, add value and never sell.

In this article we will cover various aspects and strategies for property developing no matter whether your strategy is buy & hold, or adding value to on-sell for profit.

Note: For the purpose of this article we will categorise two type of property developers; the Investor who adds value and never sells, and the Developer who is a Property Trader.
All of the strategies could be implemented by both types of investors, but some are more complex and used mainly by the Property Trader type.

Being a property developer doesn’t suit everyone, many property investors simply don’t want to, or don’t have the time or knowledge or finance to go through a full scale property development, such as being involved in broad acre subdivisions, building townhouses, office buildings or commercial dwellings.

Let’s start with strategies which are simple and most suitable for the property investor who is happy to add value and hold. These are investors who purchase a property, develop or improve the property and consequently add value and never sell. Gradually we will give you some examples for how to actually realise the profit into hard earned cash.

The “add value and hold” investor needs to think like a developer and look for ways to add or create value in order to maximize the return on investment by creating more cash-flow and equity.How To Profit From Property By Adding Value and Propety Development

There are a number of ways to achieve this, including:

• Buying a property that needs work (Do-up / Rehab), then fix it up and immediately increase its’ market value. There are always rundown properties on the market and they scare off the average buyer who is just looking for a place to live. But they could be just perfect for you.

• Buying a property at below market value by finding a motivated vendor.
Finding these properties requires a lot of hard work researching the market, networking with agents and other investors, advertising privately for “Properties wanted” or you may find properties with strong upside potential and a twist on www.PropertyGenie.co.nz website.

• Adding a bedroom or building another story is also a good option; this will result in higher rents and increase the property value and appeal.

 

Some relatively simple examples for how to actually realise the profit into hard earned cash:

  • Renovate and sell can be lucrative business but it is also has its risks, buying well and doing your homework and a comprehensive market research on the local values, construction costs, understanding interest rates movements and having a contingency fund is crucial for minimizing risks
  • Relocating houses offers great opportunity for high yields and capital gain, relocating second-hand houses is one of the cheapest home building options that many investors have chosen to create an affordable rental opportunities. By shifting a relocatable home onto bare land, you should be able to save between 30%-50% of the cost of building new. There is a number of things that need to be considered before the house is ready for tenanting, to name a few; most houses for removal require renovation work from new kitchens and bathrooms, to painting and decorating, some require re-wiring and plumbing, new outdoor decking, new drainage and power and phone connections to service etc. A building consent is required and a development contribution levy may be paid to the local council. It is recommended to obtain a quote from the relocating company.
  • Subdividing a block of units, Flats or Apartments is a relatively straight forward process for adding value; this is provided that the block is built with permanent material like brick or block walls in between the flats. Some local authorities my charge a development contribution levy which varies from council to council. In general provided the flats are fire rated between them, and safe, the subdivision could be done otherwise the flats would need to be fire rated which may blow up the budget and make the process not worth doing.
  • The following work is usually required: Upgrade each flat service with separate electric and water metres, marked parking and suitable driveway would be part of the subdivision consent

 

All of this strategy is attractive to both buy and hold investors and the property trader type.

In Part 2 of How To Profit From Property i will cover Land Subdivision, AND In Part 3 i will cover Exit Strategies for some of the above Strategies.

 

Click bellow to learn more and purchase my eBooks please visit this page:

Property Investment Two Must Read eBooks (Combo Special)

 

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Expert's Bio

Hadar Orkibi

Hadar is a full time Property Investor and Trader, Specialising in Do-ups & Add value, Multiple income properties, High Yielding, Commercial, Equity and "Move Forward" Properties. Hadar is co-owner and Sales & Marketing Mangers at www.PropertyGenie.co.nz. Owner of the Private House Buyers companies www.WeBuyProperty.co.nz & www.PropertyBuyersAuckland.co.nz/ Find Hadar on Google+

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