Whether you own commercial or residential property assets the key to making money in the longer term is to maximise their value. This may mean a significant investment in the short term or you may be lucky enough to have a property which is fully developed and there is little more that you can do to it. However, some property investors do fall into very simple traps when they go into a property investment with an inflexible frame of mind.
Does the property need developing?
Very often people automatically assume that a property which they buy will need some form of development whether this is cosmetic or structural. The reality is that not all property developments do need further work and indeed you may well have acquired a property which is the “finished article”. Future buyers will no doubt add their own design stamp on any property they require but there is no point in developing the property further just for the sake of it.
On the other hand, if you acquire a property which may need development and investment do not be afraid to go down this path. It will depend upon the type of asset, the investment required and ultimately the final target price but if you can add double any additional investment onto the final value of the property (whether cosmetic or structural) this would seem to be worthwhile?
Local pricing ceilings
Unless you have done your homework on the local marketplace there is a trap which many people seem to fall into – overdevelopment. Many local property markets will have a ceiling on the price of property in the area which means that if you develop an asset further and it goes beyond this ceiling then you may not get “full value for money”. The price ceilings are not always set in stone and they can change dramatically if there are developments and changes in the local area. However, you do need to be aware of what people are willing to pay in the area even if you were able to create a masterpiece!
If you look at it from a pure investment point of view, if you’re able to acquire a property which brings in an attractive rental income with minimal additional investment then this could in theory fund future transactions. In many ways it does depend on the individual’s own objectives, financial situation and timescale but it is best to mix-and-match when looking at a long-term property portfolio so that you are not over dependent upon one particular type of property or area.
Ask the estate agents!
If a friend was to ask you about the price of property in a particular region you would simply tell them to speak to the local estate agents. Well, whether you are looking to buy a property, perhaps just testing the water or you have a development in the offing, there is no harm in asking the advice of local estate agents. Whether they think they may be able to deal with you in the future is another matter but local estate agents (and indeed their websites) offer a wealth of local knowledge. Do not be afraid to use that!