The market for investment property in Perth and across Australia has become a lot more volatile over the last 5 years.
It is a poor strategy to just rely or hope to get capital growth, so many are looking for alternative strategies to add value to their investment properties in Perth. One of the more popular strategies is subdividing or developing property. This can produce a nice return if executed correctly with the right property.
We always recommend that you consult a professional, but here are five questions that we feel are essential for anyone considering to subdivide an investment property in Perth.
(1) Is the property currently zoned for development?
A call to your council should be enough to find out the current zoning for any property. The R-code will tell you whether your property can be developed, and what the limitations are.
You should also build a “team” consisting of a buyer’s agent, a builder and a surveyor who know the ins and outs of the Perth property market and can help you with your due diligence. Together, they can tell you whether it is worthwhile to investigate an investment property further.
(2) Is the property earmarked for a zoning change allowing greater density? If so, when?
If you read my blog, you may know about this already, but a lot of people in the Perth area are taking advantage of recent zoning changes allowing for greater population density. The technique is to purchase a property at today’s market value and then pick up a good gain when the zoning changes to allow higher density.
We strongly suggest you make sure that regardless of any proposed changes, you can make money from the property as it is currently zoned. Otherwise, if a council takes too long to affect the zoning change, an investor can be forced to sit on the property too long and lose money. It is always wise to call the town planner and find out what the council’s timeframe is for rezoning the area.
(3) Can I retain the existing house?
When doing a smaller subdivision the best-case returns are often found if you can retain the existing house. This gives you a cash flow while development is getting done and with a lot of a smaller properties value contained in the house, it improves your returns if you can keep it.
(4) Is this area poised for capital growth in the next 1-2 years?
This is another principle we repeat often to our clients. Any investment property should be in an area in which growth is projected within the next 1-2 years. Many people assume that any house in the Perth market will be in a growing area. This simply isn’t true. No one has a crystal ball but by developing a product that will be in demand will see you minimise your risks.
(5) Who do I need on my team?
With literally thousands of dollars at stake with every purchase, sale and development, no individual investor can afford to go it alone. You must work with a professional specialist who can help you maximise the returns from your investment property in Perth.
Jarrad Mahon is the director of Investors Edge Real Estate. Their property managers and buyer’s agents specialise in investment properties in the Perth area. Call 1300 472 427 for more information or visit their website at https://www.investorsedge.com.au/.