In Economics & Finance, Property Investment

Unlike shares, property is neither interchangeable nor ‘the same as all the others.’

Each and every property is unique: each and every owner is unique.

This is where comparisons between shares and property break down – only the numbers are looked at.

Here’s an example to illustrate the point:

Let’s say a wise and thoughtful buyer offers to buy a house, whose seller has put themselves under pressure to leave, at a low but fair price. We’ll say that the house is basically sound, but ‘tired’ and — in agent-speak — ‘needs some TLC’. A deal is struck, and the buyer becomes the new owner.

Immediately, the buyer spends $8,000 – $10,000 to clean up & paint the house, install new carpet; perhaps replace a tired old window air-conditioner with a split system, add a simple carport, & tidy-up the garden. The house presents well as a home for tenants, and is now also more attractive to potential investor-buyers. If the buyer’s ‘fix-up’ investment of less than $10,000 lifts potential rent by only $20 a week, that would represent an immediate return on the fix-up spend, of over 10%.

If an investor-buyer now looks at the property and offers 10% more than our buyer paid (say about $35,000), then even after buying costs, our buyer has proved that an involved and interested owner makes a major difference in the value (and usability) of a property.

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