One of the most popular types of articles for people looking to invest, is the arguments for and against property, shares or bonds and even leaving your money in the bank.
While many like to quote the performance of the housing market vs the share market over the last 3, 5 or 10 years etc, it is not strictly all about performance.
There are also many other smaller factors that I feel give the edge to a property investor.
Perhaps the bigger reason that I choose property over shares, is because you can add value to property. The average person cannot do that with any other asset.
Our Director Shannon Davis’ favourite saying is “You can’t go down to Woolworths and paint the walls and hope the share price goes up!”
The ability to add value to a property, really is the Ace up the sleeve for an investor if they are looking to increase value, return and widen their asset base faster.
Let me demonstrate using a recent purchase here in Brisbane;
We recently purchased this home for a client in Stafford Heights, approximately 8km from the Brisbane CBD.
The location is well known to us as the suburb is a proven performer and in the early stages of gentrification.
The property was an old and tired, 3 bedroom, 1 bathroom, 2 car home, purchased for $567,500.
Something that we identified early on in our due diligence was that the property needed a renovation.
Even better, it was very simple to add a 4th bedroom and a second bathroom in the form of an Ensuite to the Master Bedroom.
We undertook the upgrades and renovation for our client at a total cost of $80,000.
After Renovation costs, it would be fair to say that we have increased the value of the property by more than $50,000.
Granted there are additional costs associated, but the primary purpose of the exercise was to widen our client’s asset base faster, rather than relying on the market to do the heavy lifting.
Secondary benefits included adding additional rental income, finding a better-quality tenant and increased depreciation.
We had manufactured a 10% gain from a cosmetic renovation and simple reconfigure.
We may have had to wait a couple of years for the market to add this value for us, in some areas even longer.
While other assets do not represent this type of opportunity, property does and if you are currently looking to invest in property, you may be missing a trick.
When there are turbulent markets, lower than usual inflation and uncertainty in the market, the ability to add value cannot be underestimated, it is the Ace up the sleeve.