Expert Advice by Rich Harvey

25/07/2014

Finding a home or investment property with “value-adding” or renovating potential is a great way to increase your equity.  For each dollar you spend on renovating you should aim to increase the property value by a minimum of $1.50 to $2.00.  The key thing to keep in mind is to not over-capitalise and it’s important to renovate to a standard that is suitable for the suburb. 

Here are five sure-fire ways that you can rapidly increase the value of your property.  As with any renovation project, make sure you scope out the costs and benefits first before jumping headfirst into a project.  Your time spent planning up front will pay handsome dividends at the end.

 

  1. Add a Bedroom

This is one of the best methods to increase rental yield and increase the property’s value.  Look for properties where a flexible floor plan enables you to move a couple of internal walls or enclose a large balcony area within the roofline of the house.  This way you can avoid having to submit a DA to council, reduce your costs and speed up the renovation process.  I recently added a bedroom to a 3 bedroom investment property we owned.  We enclosed part of the rear balcony area and created a 4th bedroom to the house.  This enabled us to increase the rent by $100 per week.  Our only challenge for this reno was to find bricks that closely matched the original 1960’s red brick (which we were able to achieve)!

 

  1. Add a Granny Flat (mini-home)

Since the state government introduced more flexible rules for allowing granny flats to assist with providing lower cost housing, this has been an extremely popular and effective method to create a positive cashflow investment.  However, there a couple of key tricks to look out for when selecting a property that might suit the construction of a granny flat. 

Although the minimum size block for a granny flat is just 450sqm, this size block does not allow sufficient space for outdoor areas for the existing house and the new granny flat.  You need a block size of around 600sqm to adequately fit a reasonable size flat and allow sufficient setbacks from side and rear boundaries. The maximum size granny flat is 60sqm and this allows a good sized two bedroom flat. Watch out for the position of sewer lines and drainage and ensure there is the ability for adequate parking.  Our team of specialist buyers’ agents has completed over 400 of this strategy for our clients whereby we have negotiated builders’ discounts.

 

  1. Kitchen

The hub of the home is the kitchen.  This is where all the action happens every day, so it makes perfect sense to upgrade the kitchen to a modern day standard. Fresh clean cupboards and benchtops, new appliances, good storage and lighting are essential.  An island bench can add wow factor and glass or mosaic tile splashbacks can add style. However, be careful not to go overboard.  Don’t install a stone benchtop in suburbs where laminate will suffice.  You can source discount appliances online and there a loads of kitchen companies keen for your business.

 

  1. Bathroom

Another important room in the house that creates an impression is the bathroom.  “Daggy” and “out-dated” bathrooms do not impress valuers or tenants so it is important to get this room to the right standard to maximise rent and value.  Renovate the bathroom with light and bright clean colours.  You are better off choosing light tiles that reflect light rather than heavy dark colours that make the room feel smaller.  Larger rectangular tiles laid horizontally make the room look larger. If the budget allows, full height tiling looks great.  A free-standing bath can create an amazing wow factor if there is enough space, along with semi frameless or frameless glass shower screens.

 

  1. Subdivisions

One of the ultimate ways to increase equity is to find a property with subdivision potential.  You need to find a large block that can be split into two or more blocks. The local council will have a DCP (Development Control Plan) that specifies the minimum lot size for subdividable blocks.  Be sure you understand the entire subdivision process before embarking on a subdivision strategy. 

While there are handsome profits to be made, there are plenty of traps for the unwary – these include dealing with issues like subsidence, stormwater run-off, easements, covenants, sewerage, water and electricity access. And don’t forget the council will holding out their hand for the section 94 contributions as you are creating an extra lot. Finding a profitable subdivision site is hard work which takes countless hours of searching, calling agents, talking to council and negotiating.  You will also need some expert help creating a team of consultants including town planners, surveyors and agents.

After the subdivision process you have several options to either sell and take your profit or retain the new lots (build) and revalue to extract equity.

Whatever your chosen strategy, I recommend you get independent and expert advice to help you along with each step.  Pick a strategy that works for your situation and helps you move toward your property goals. Ensure you have your finances in place and create a buffer in case of delays or over-runs.  

If you are looking for your next home or investment property, please call my friendly team of buyers’ agents on 1300 655 615 or + 61 2 9975 3311 today to discuss your requirements or email us your wishlist.    

 

Rich Harvey

Managing Director, propertybuyer

This article was written by Rich Harvey, founder and Managing Director of propertybuyer, Sydney & Australia’s most awarded Buyers Agents. Propertybuyer helps property investors and home buyers search and negotiate the right property at the right price, everytime.  For further details please visit www.propertybuyer.com.au or call +61 2 9975 3311 or 1300 655 615.

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Disclaimer: while due care is taken, the viewpoints expressed by contributors  do not necessarily reflect the opinions of Your Investment Property.