Property development- adding value to your investment property

Wednesday, 15th Sep 2010

Property Development

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 option, 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 or improved lighting, or they could be more ambitious like reconfiguring the floor plan and building extensions. Renovations can be the simplest way to add value. Unfortunately some investors spend more than they get in return by focusing on the wrong areas or over-capitalising.

Constructing new buildings is another common development technique. It may involve purchasing a vacant plot and building a property, 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.

Subdividing land is an alternative, and sometimes simple, way to develop and make gains. It can go hand-in-hand with construction by subdividing a building on the newly created plot, or the subdivision can be sold vacant. Property investors must be careful when undertaking a subdivision on its 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 often includes 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 maximise the 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 securing 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