If you’re an investor who is prepared to be creative and wants to find the best opportunities, then the current market might be the perfect time to use value-add strategies.
Typically value add strategies are things like renovations or small-scale development opportunities. These are ways you can manufacture equity, which is perfect for a market where interest rates are rising and growth rates might be capped for the next 12-24 months.
The reason I see an opportunity at the moment is because of where the market has come from. This is particularly clear with development sites.
During the heat of the COVID market in 2020 and 2021, a lot of people bought development sites with the intention of building. The issue is that they were paying top dollar for the sites and they had done their feasibility based on getting higher prices for their end product.
While prices have rebounded recently, many locations aren’t quite back to the levels we saw at the height of the boom.
For savvy investors, this is an opportunity.
We’re starting to see a number of these sites start to come back onto the market because the numbers no longer add up for these developers. The final sale prices are lower and there has also been a significant jump in construction and development costs.
That means they can’t move forward with the project and many are simply starting to sell them off.
If you can now go out and buy a site for less than that person paid for it, you might be able to find some really good opportunities. It will also require you to get creative with what you’re looking to do.
That might mean coming up with a different type of design or maximising the land in a more effective way.
There’s a huge opportunity to do that and that’s something we are doing ourselves right now.
As mentioned these opportunities are a fantastic way to manufacture equity, at a time when price growth might start to slow down. Especially if interest rates continue to rise.
We’ve already seen properties that need renovation work, become less appealing to investors and home buyers. People aren’t confident getting the work done at a time when it is harder to get trades, building costs are higher and the length of time it takes to build has blown out. So they would prefer to buy something that is ready to go. But it’s an opportunity for us.
Value add strategies are a great way that investors and developers can keep growing their equity and portfolio over the next few years.
If you’re prepared to do the work and go that extra step there are amazing opportunities in the current market.
If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.
