Share your past experiences on adding value to a property

Hi, thanks for the post.

I’m a big believer in having a strategy in property. Value add can be a purposeful path, particularly as waiting for the market to do all the work, can stretch out your time horison.

I started with accumulation using equity and Lines of Credit like a lot of investors about 8 years ago. I found this limiting as it sucks up your cash flow and the banks eventually stop lending…

Having learnt these lessons, I sold down and dived back in, with a cash flow requirement in my investment criteria. I started by converting single housing into dual living, which meant neutral to positive outcomes, then into shared living property for positive cash flow. Although these options improved cash flow significantly, the cost to reno didn’t always value add because at the time the market wasn’t paying a premium for renos. They only went up in line with the money I put into them, with the yield as the main result.

So even though my strategy evolved to include income, it was still subject to market to create equity for reinvestment. I guess ‘luckily’ for me I was in Darwin at the time and the market did eventually offer enough upside for next steps.

In an attempt to create equity and cash flow at the same time, I moved to Brisbane to access low/ medium density zoned property at an affordable price to start doing small lot developments, which I’m still doing (and help others to do too). The idea is to manufacture equity, but at price that the rent achieved is in surplus of holding costs to create equity and passive income. I’ve done 3 sites already and current working my 4th through DA atm.

The strategy is defined, which means I dont need to worry too much about all the other options in the market while the there is still money in it. Which means I’m head down and channeling my effort working one project into the next. This approach has yielded my best success in property, allowing me to hold what I create and still have enough to reinvest into another site. using the income my portfolio generates to cover cost and provide working capital. Its getting to a point I could live off it if I wanted to, which is great peace of mind – financially speaking at least.

Property is a great market, but there is no easy money. My experience has helped me develop a formula to apply, stick to and repeat. You can learn this for yourself over time or pay others to spell it out for you.

In any case value add is the right option in my opinion, particularly if you want some control on outcome..

• This reply was modified 10 years ago by  Richard.
• This reply was modified 10 years ago by  Richard.