Developing could be a good option if you’re looking to add value to your investment property
The potential to add value without having to wait for a market uptick is an exciting aspect of property investing. Well-planned renovations or a development project may have the potential to deliver healthy gains.
Research is key. Renovations can sometimes be costly. So, knowing the features that appeal to tenants could help you focus on improvements that deliver maximum value. Ideally, renovations should bring an uptick in rent plus an increase in the property’s market value.
Opportunities to add value aren’t restricted to a fresh coat of paint. A development project, could see you unlock a property’s full potential. Other options could include sub-dividing a block, adding a granny flat or building multiple dwellings on a vacant block.
Start by getting to know council rules for your area. Major developments, and even many renovations, need to meet strict council requirements.
Don’t overlook the impact of tax. The cost of some renovations may be claimed immediately. Other expenses need to be written off over time. Your tax professional can let you know the rules, so you claim all the deductions you’re entitled to while staying inside tax office rules.
It makes sense to maximise your investment property’s returns. A range of development options could let you do just that.
A granny flat has the potential to turn spare land into a gold mine. But while turning spare land into a money spinner can be appealing, it’s important to do your research early on.
The rules may vary between locations. But in many cases the granny flat’s owner must also own the main dwelling. Granny flats can’t normally be built on their own sub-divided block.
This is important because the granny flat and the main dwelling may need to co-exist on a single title. So, think about how a granny flat could impact your property’s market value. Do your research and learn about the risks of adding a granny flat before making any decisions.
Zoning sets out the way that a block of land can be used and council approvals needed to complete any development.
Zoning can sometimes be a complex process. Be sure your land is suitably zoned for your proposed dwellings before getting started.
Any major development is likely to require a development application (‘DA’). Each council has slightly different requirements. But lodging a DA is usually a step-by-step process.
Do your homework to know what’s allowed on your property and any potential constraints. Have plans drawn up for the development and even talk with neighbours to explain your proposal. Then lodge your DA with the council along with any certificates or other paperwork that’s needed.
Budget for the fee to lodge your DA with council along with the cost to prepare it. Costs may be based on your project’s value.
Getting the council’s tick of approval is a must. A phone call to the council could shed light on the rules that apply to your development.
One way to make money as an investor can be to sub-divide the block if it’s large enough.
Subdividing can take many forms. You can divide a single block into several lots. You can rearrange the boundaries of a block. Or you can create an easement to give road access to a block.
Securing council approval for the proposed subdivision is the major hurdle. Also consider the market appeal of the blocks or development you are planning.
You may need to register for goods and service tax (GST) if you’re buying land with the idea of subdividing it for sale. That’s because as far as the tax office is concerned, the transaction could start to look like a money-making business.
The benefit of registering for GST is you can claim credits for the GST included in any expenses related to buying the land. You’ll also need to include GST in the sale price of the land once you’ve subdivided.
Talk to your tax professional or get in touch with the tax office to know exactly where you stand.