Value adding is about accelerating the equity creation in a property. This can be done in one of four ways;
Renovation can, generally speaking, be carried out on any property, whether it is an apartment or freestanding dwelling. It can be as little as a cosmetic paint job, or a full scale gut and redo. A renovation is often simple to envisage, and is often seen as an exciting challenge or project, however making sure the renovation meets the intended outcome and achieves equity growth or profit is not always simple to execute. When executed correctly, renovating a property can lead to an increase in rental return, tax benefits through depreciation items and an increase in the property value itself, which will result in increased equity.
Extensions are a more costly way to increase the weekly rental return or equity in the property. Extensions can be as simple as adding another bedroom, which is always reflected in an increase in rent, or as elaborate as a second floor addition. Extensions have to be carefully analysed as to who the target market is and what the most desirable form of property attributes are within the area. If the most desirable attributes are a 3 bedroom, 2 bathroom, 2 garage property and you already have this, be careful not to spend money extending a property that already suits the expectations of that particular market.
Subdivision and development
Subdivision and development both require an intimate and extensive knowledge of council land use zones. Both can lead to immediate short term capital gains, however both require time and diligence in both researching the initial site to acquire, as well as carrying out the subdivision or development.
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