Unearthing hidden potential

By Victor Kumar
While there are literally millions of properties in Australia, they are not all created equally and some are actually hidden gems if you know how to recognise them.
That’s why expert property research involves much more than just what you can physically see at an inspection.
If you can unearth potential that not many people know about, then you’re on the right track to achieving solid profits.
Last month, in this series on how to buy under market value, we considered benefiting from bulk property deals as well as profiting from simple subdivisions.
This month, I’d like to talk to you about why it’s so important to not judge a property book by its external cover.

Don’t be judgmental
One of the keys to successful property investment is knowing when a property could be much more than it currently appears to be.
What I mean by that is not that you could simply renovate the property, which of course you could, but you should also think much bigger than that too.
What about if that Plain Jane house that you’re inspecting had the hidden potential to be turned into a beautiful block of brand-new townhouses and you’re the only one who knows it?
We once assisted a client who had inspected a modest $390,000 property but we also knew that the dirt that it was built on was where the true profit could be found.
You see, the local Council had changed its local environmental policy to allow re-development of the block.
At face value, the property looked like an OK investment as is, but by building five villas on the site at a total cost of $1.2 million and a bank value of $1.5 million, the investor walked away with a hidden profit of $300,000!
That’s a fairly extraordinary result when you consider the property was only “worth” $390,000 to the seller and to the majority of the buyers who inspected it.
Zoning matters
That real-life example shows why it’s always advisable to check Council and State Government planning policies in case an area is up for re-zoning.
That real-life example shows why it’s always advisable to check Council and State Government planning policies in case an area is up for re-zoning.
If an area is re-zoned to allow developments, that is where you can double (or more) your profits by constructing a small unit or townhouse development on the site.
Another option could be to on-sell the property with a Development Approval in place reflecting the new zoning, which won’t bring in the same profit as completing the development yourself, but will still mean more dollars in your back pocket than selling it in its original condition, with less risk.
That’s why it’s vitally important to keep abreast of any zoning changes in the areas that you’re interested in investing.
Often many of the homeowners or sellers aren’t aware of the proposed changes, which is where you can quickly profit from a property’s hidden potential.
Remember that the secret to buying under market value properties is all about recognising opportunities that other people do not. It is not necessarily just about how many dollars you can get off the listed price.
So, to be at the top of your game, you must have completed thorough due diligence; you must know what’s allowed, what’s not, and what’s about to be; and make sure that you have access to expert advice to increase your chances of achieving the very best hidden profits.
If an area is re-zoned to allow developments, that is where you can double (or more) your profits by constructing a small unit or townhouse development on the site.
Another option could be to on-sell the property with a Development Approval in place reflecting the new zoning, which won’t bring in the same profit as completing the development yourself, but will still mean more dollars in your back pocket than selling it in its original condition, with less risk.
That’s why it’s vitally important to keep abreast of any zoning changes in the areas that you’re interested in investing.
Often many of the homeowners or sellers aren’t aware of the proposed changes, which is where you can quickly profit from a property’s hidden potential.
Remember that the secret to buying under market value properties is all about recognising opportunities that other people do not. It is not necessarily just about how many dollars you can get off the listed price.
So, to be at the top of your game, you must have completed thorough due diligence; you must know what’s allowed, what’s not, and what’s about to be; and make sure that you have access to expert advice to increase your chances of achieving the very best hidden profits.
To read the rest of the blog series;
click here. (How to profit from under market value property)
click here. (How to profit from distressed sales)
click here. (Why “warty” properties can still make beautiful investments)
click here. (How to profit from bad marketing and presentation)
click here. (Benefiting from institutional sales)
click here. (Benefiting from bulk deals and simple subdivisions)