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5 ways to add value to property

Wednesday, 5th Sep 2012

renovating

As a property developer, it’s important to be able to think creatively when it comes to maximising the value of a property. Here’s five different ways of adding value you might like to consider.

Property developing is all about adding additional value to a property above its current worth. The great thing about property developing is there are a number of options available to you to add value. You just have to think a little more creatively!

The most obvious one and the one most first-time developers tackle is renovations. Renovations can be as simple as a cosmetic upgrade like fresh paint, new carpets, a garden tidy-up, improved lighting and so forth. Or they could be more ambitious like reconfiguring the floor plan and building extensions. Renovations can be the simplest way to add value. Unfortunately for some though, they can cost more than they get in return because of spending too much in the wrong areas and overcapitalising.

Constructing new buildings is the other most common development technique. It may involve purchasing a vacant plot and building, or perhaps demolishing an old home on a large plot to replace it with a number of new villas, apartments or townhouses. Construction tends to be a more capital intensive process that carries more risk and requires a longer time period to complete, but for that reason it can be more lucrative than other options.

The subdividing of land is an alternative and sometimes simple way to develop and make gains. It can go hand-in-hand with construction (ie. subdivide then build on the newly created plot) or can be tackled on its own and sold off. One must be careful when tackling it on it’s own as it’s often difficult to make a profit unless the plot has been held for some time or the nature of the subdivision is difficult or risky. If the subdivision was straightforward with virtually no risk, the price paid for the property in the first place would probably include the future value of subdivision.

Aside from these familiar techniques, you may like to consider some less known ones such as strategic acquisition.  This may involve, for example, securing two adjoining sites which may be worth more together because the combined land could be split between the two sites more effectively to maximisethe development potential. The final technique involves adding value to the plot through obtaining a planning permit or having it approved for rezoning, all without laying a brick.  As these council approvals can often be difficult, time-consuming and not guaranteed, simply having the paperwork signifying approval can be extremely valuable to another owner or developer who didn’t have the time or wasn’t prepared to take the risk on the plot before.