Money has never been this cheap to borrow. But if you’re wanting to get into the real estate market and your only strategy is ‘buy & hold”, then you could be waiting a while for a return.
5 Strategies for a Flat Property Market
In a property market when investors can’t count on price growth due to market factors outside their control. There are some things they can control to help ‘manufacture’ some capital growth.
Buy Well
In a buyer’s market, the opportunity to buy at a discount is more readily available. Along with being able to negotiate better terms or a delayed settlement.
When a property is purchased at below market valuation, a built-in buffer (equity) is now factored in. With better terms, more due diligence checks can be made and with a delayed settlement.
You can use this time to potentially get a development approval to add value.
Purchasing at a good price and land banking until the time is right for your preferred strategy is another popular option.
Cashflow is King
In a flat property market, getting a positive cashflow is going to help weather the storm. This can be done to an existing property by adding a bedroom. A granny flat or doing a minor renovation to increase rent.
For new purchases, think duplex’s, dual occupancies, share houses, regional areas or commercial real estate.
Renovate
Adding value to an existing property with a well thought out cosmetic or structural renovation will increase the value. Increase the equity and increase the rental yield.
The trick is to not over capitalise and get a balance between added value and added rental income.
Purchasing, renovating and flipping is another strategy that can work in a flat property market. But suburb research and buying well is crucial for this strategy to work.
Subdivide
Adding value to an existing property through the process of subdivision can give you many options in a flat property market. Having the ability to sell the new vacant lot to pay down debt or maybe build on the new lot to create a new investment property at ‘wholesale’ works well.
In Brisbane, you generally need a 1,000m+ block to enable you to retain the existing dwelling on the front 400m2. And create a new rear 600m2 battle-axe lot. Corner blocks offer the flexibility to retain the existing dwelling on a smaller 800m2 lot.
DA / Develop / build
Check the zoning of your existing property to see what the potential development upside is. Talking to a town planner will help here. Adding value though a Development Approval is a good strategy in a flat property market.
This could be for subdivision, townhouses or units. Depending on your zoning, adding a duplex in the back yard could be an option. If you intend to sell, having the DA will make your property more attractive to buyers.
For new purchases, locating properties where the existing dwelling can remain is a good strategy in a flat property market. Having the holding income from this dwelling while you obtain your development approval.
Then build your duplex (townhouses) in the back yard or subdivide the back yard off, can help you make this strategy profitable.
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